In many companies, cash is king and they can make better use of their available cash than using it for paying outright for a depreciating asset which can only be written down over many year, some years of which will be after the vehicle has long gone. The time involved in finding and negotiating the purchase and then ultimately getting rid of it is quite prolific and its time that most companies have a better use for. With business car leasing however, means that the purchase and the sale are handled by someone else, leaving you to run your business
The basic overview
Leasing a car is like renting a property, with a term contract, specification and agreed payments. At the end, you simply give the car back and we arrange your new one. This applies whether it is a car or van lease.
In the mid 1990’s, a court case won by the leasing industry against the VAT meant that the leasing company now reclaims all the VAT on a car that they buy to lease to you on contract hire. That VAT saving is something that you cannot achieve buying a car. Because of the buying power of the leasing companies, the purchase prices are lower than those that the man in the street could ever expect to achieve. These two savings are reflected in the interest and depreciation charge that go into making up the monthly payment. The way that monthly payments are calculated can lead to surprising
payment figures for a car that at first seems to be expensive, but has a price retention that means the depreciation is lower than a comparable but cheaper car. The monthly payment, normally calculated over 2,3,4 or 5 years can if you choose include your maintenance and tyres. Including maintenance in our experience brings with it much more than simply getting your car serviced and tyres replaced. Should you have a problem that is viewed as having some element of wear and tear, then the relationship between the funder and the manufacturer is on your side
If the car is used for business mileage only, a VAT registered company is able to claim 100% of the VAT on the payments, if however the car covers a private miles at all, this reclaim is reduced to 50%.During the lease period, you can claim all or a proportion of the payments, you should check with your accountant how this will be calculated in your company case