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Accounting Benefits of Business Car Leasing

Many businesses, regardless of their size, decide to opt for leasing their cars on contract hire. Contract hire allows a business to lease a vehicle by paying a fixed monthly amount for the duration of their contract and replace it with another vehicle and a new contract when the previous one comes to an end.

Whilst it is a popular method, because of its simplicity and cost-effectiveness, many are not aware of the significant accounting benefits business car leasing can offer. Have a look below and to find out more:

VAT

If the company car is driven solely for business purposes without any personal use, as much as 100% VAT can be reclaimed (if the business is VAT registered). If the employer or the business’ employees use the company car for personal use, as well as business purposes, the company can still save up to 50% of the VAT.

Cost

It is more affordable for the business to have a company car on contract hire as opposed to buying it. In the long term the depreciation costs that would be incurred if the company replaces their fleet frequently would also be significant, making contract hire a better option for cash flow management.

By using contract hire the business would also spend up significantly less than it would with a loan or hire purchase, meaning the business has more liquid capital to spend on investment.

Maintenance

The inclusion of maintenance in the monthly payments is another good reason for considering contract hire. Many leasing companies offer contracts that include maintenance costs or offer great deals on additional services.

Return On Investment (ROI)

Leased cars are not considered to be assets, meaning your business’ balance sheet is will show an increased Return on Investment (ROI).

Repayments

When you choose your next company car, be mindful of their CO2 emissions. If the vehicle on contract hire emits less than 130g/km of CO2, you will be able to claim back 100% of the monthly payment against tax as a company expense. If the vehicle emits more than 130g/km, the business will still be entitled to claim back a percentage against tax, although this will be lower.

Resources

As the leasing company will organize the administration of the car throughout your leasing contract, the business will be able to manage their resources more efficiently. This means that time-consuming administration is minimized; saving the business time and money in the long run.

Leasing a car for your company through business contract hire can be a very positive financial decision. As mentioned in this article, there are many benefits of leasing a car. More and more companies are seeing contract hire as the most cash-flow friendly and low-risk solution for them.

Contact us for more information about our cheap business car leasing deals, we will be happy to help.

If you are looking for great accountancy advice for your business, contact Makes Sense Accounts.

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Posted on 20th November 2017 at 4:03 PM

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