Leasing a car through a business

Leasing a car through a business

Leasing a car through a business is one of the most cost effective forms of car leasing and the most popular way of hiring a business car or van in the UK, with more and more funders and manufacturers pushing this method of funding.There are a few different options for leasing a car through a business and its always best to speak to your accountant before taking this route to see if it suits you and your business. You maybe liable for Company Car Tax and additional costs within the business including National Insurance, so please do get this assessed by a professional.Business contract hire agreements allow your company to effectively hire cars or vans for a set amount of time. Usually these contracts are between 24 months and 60 months, but can be hire or lower. We ourselves offer short term contracts from just 6 months, we even offer flexi leases from just 28 days which you can put through your business and work out much cheaper than Daily Rental.

How do you work the payments out?

There are three main points to how a business contract hire is costed. First is how much the vehicle is bought for, larger funders get higher discounts so the price of the initial purchase can be brought down dramatically. The second item the funders look at is how much the car should be worth at the end of the contract, this is known as the residual value. This can be difficult to work out, especially if the model is knew to the market but this is also why the funders will ask you for an annual mileage.

The funder will then deduct the residual value from the purchase price of the vehicle, the balance is then split over the term, plus a bit of profit and maybe some optional maintenance, and that leaves your monthly payment.

Pro’s and Con’s of putting the car through your business?

There are loads of pro’s and con’s to putting a car through your business and as suggested before, we always advise that you speak to your accountant before comitting to a vehicle, but please see a few below:

  • Low Initial Payment – Business Contract Hire usually requires six monthly payments upfront, these are non-refundable and act as an initial payment. Occasionally a company may ask you for three, nine or twelve months depending on your credit assessment. On Short Term Leasing we usually take no deposit and just the 1st months rental upfront, plus an application fee.
  • Optional Maintenance – To really fix the costs of your contract hire, then opt for the maintnenace package to include items such as servicing and tyres, but be aware these do not cover accidental damage. Sometimes it maybe better opting for a dealer purchased service pack over the monthly cost.
  • Fixed costs – The cost of the business contract hire should not change over the course of the contract, unless your mileage increases and you need the funder to adjust. There should be no fluctuations in the rental caused by interest rates as its classed as a hire over than a loan.
  • Not shown on balance sheet – At this moment in time, you do not need to show a contract hire vehicle that has been put through your business on the balance sheet. This helps prevent tying up capital in vehicles that would need to be depriciated. In turn this will improve the company’s gearing and liquidity ratio.
  • Flexibility – Always look at the future of your business, by opting for a lower cost longer contract it may cuase you issues if that member of staff leaves or the business takes a new direction. Usually opting for a shorter contract offers better flexibility. Usually business contract hire is 24 months plus, but we do offer Short Term Contracts offering 6, 9 and 12 month vehicles at reasonable costs.
  • Excess Mileage – Don’t just got for an 8k contract if you know that you’ll be doing 15k per annum. Excess mileage costs can vary depending on the vehicle and the funder. On short term, due to the higher loss of the RV over a shorter period these can be around £1.50 per mile, depending on who the funder is. It may only cost you a few pound more over the course of the contract.
  • Damage – Standard wear and tear is allowed on longer contracts, however the funder can still be quite strict on the level of repairs. Also make sure that if you do get the vehicle repaired, it has been done by a qualfied bodyshop and not a back street garage. Funders are quite within their rights to return this vehicle back to standard and charge you for doing it.
  • New Business – If you are newly incorporated then larger funders may not look at you favourably until you have produced at lease 2 years worth of positive accounts, however we offer an option for new business start-up’s using our Short Term Fleet.

Putting a Short Term Car through your business

We offer a wide range of flexi and fixed contracts on cars and vans from a great spread of manufacturers. These include Audi, Volkswagen, BMW, Mercedes, Jaguar, Land Rover, Mini, Fiat and more. Our van range caters for all sizes from car derived vans to lwb sprinter vans, we even offer Luton, Minibuses and Pickup trucks.

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