Due to the differing tax implications, company car leasing leasing tends to be cheaper than personal leasing. Companies often enjoy tax benefits, like VAT reclamation and tax deductions, which help reduce overall expenses.
What is a business car lease?
A business car lease is a long-term agreement in which a business leases a vehicle for a fixed period, typically one to five years. Short-term car leases tend to range from three to twelve months.
The business makes monthly payments to the leasing company and is responsible for the maintenance and upkeep of the vehicle. At the end of the lease term, the business can either return the car to the leasing company or purchase it for a predetermined price.
Business car leases are often more cost-effective than personal car leases because businesses can reclaim VAT on the lease payments. Like those provided by Flexxilease, business car leases are often cheaper than personal car leases.
What are the benefits of a business car lease?
Here are the top 6 benefits of using a business car lease:
1. Cost management: Business car leases typically come with fixed monthly payments, which allow for easier budgeting and financial planning. This predictability helps businesses allocate resources efficiently, avoiding unexpected fluctuations in expenses.
2. Tax deductions: Lease payments for business vehicles are often tax-deductible as a business expense, providing a potential tax advantage. This can result in significant savings for businesses, especially when compared to financing or purchasing a vehicle outright.
3. Cash flow preservation: Leasing a car requires less upfront capital than purchasing, which helps preserve cash flow for other business needs. This can benefit small businesses or startups with limited capital resources.
4. Fleet management: Leasing allows businesses to maintain a modern and reliable fleet without the administrative burdens of ownership. This includes responsibilities such as maintenance, registration, insurance, and disposal of old vehicles. By outsourcing these tasks to the leasing company, businesses can focus on their core operations.
5. Access to newer vehicles: Leasing provides businesses access to newer vehicle models with the latest technology, safety features, and fuel efficiency improvements. This enhances the company’s image and ensures that employees have access to reliable and up-to-date transportation.
6. Flexibility: Lease terms can be customised to suit the business’s needs. This includes options such as lease duration, mileage allowances, and provisions for vehicle upgrades or changes. Flexibility in leasing arrangements allows businesses to adapt to changing circumstances or operational requirements more efficiently.
Why is leasing a car through a company cheaper than a personal lease?
There are four key reasons why it is cheaper to lease a car through a company than a personal lease:
1. VAT: With a business lease, the business can claim back 100% of the VAT if the vehicle is used solely for business use. If the vehicle is also used for personal use, 50% of the VAT can be claimed. With a personal lease, the price will include the total VAT cost, as you cannot claim it back.
2. Mileage allowances: Business leases typically have higher mileage allowances than personal leases. Business vehicles are often used for more miles than individual cars.
3. Fuel costs: Fuel costs are tax-deductible for business-related miles. This means you can claim back the VAT on fuel costs for business miles.
4. Tax benefits: Business leasing offers several tax benefits, such as the ability to offset the cost of the lease against business profits.
Who is responsible for a business car lease?
The company is responsible for the business car lease. The business signs the paperwork and is liable for the payments. The employee using the vehicle is not responsible for the lease agreement.
The company can use the car for business purposes and personal trips. Still, the mileage for individual use must be deducted, and the employee will have to pay a Benefit-in-Kind (BIK) tax when using the car for personal use (including commuting).
Should I lease a car personally or through my business?
You may wonder, what’s the best option for you? It all depends on your circumstances.
A personal car lease would be suitable if you need the car for personal use only. On the other hand, if you plan to use the car for business purposes, such as commuting to meetings, making deliveries or maintaining a professional image, leasing through your business could offer tax advantages that are not available with personal leases.
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