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  4. Benefits of Car Leasing for Your Business

Benefits of Car Leasing for Your Business

10 Key benefits 

Leasing a car for your business is a fantastic option with advantages ranging from improved cash flow through to tax benefits. 

Ten benefits of business car leasing

We’ve compiled 10 compelling reasons why leasing can be right for today's businesses. In this guide, we’ll explore the benefits of leasing a car and why it’s a smart choice for your company’s fleet.

1. Brand new vehicles every few years

Lease agreements typically last between 2 and 4 years, meaning that you’ll be able to update pool vehicles and company cars regularly to keep your drivers in the latest models.

new car for business driver image

New vehicles are a better perk for drivers and come with a lot of benefits for your business too. They will have limited wear, unlike a used vehicle, come with the manufacturer’s warranty (which can sometimes last for the duration of the lease), and offer improved fuel economy to reduce fuel costs.

2. Low fixed monthly costs

When you take on a lease agreement the price will be agreed upon beforehand at a set monthly amount for the length of the contract, making it easy to budget for.

As you're not paying for the full cost of the vehicle but rather to use it for a set period of time, and the cost of this takes into account the expected resale value of the vehicle at the end of the contract, a lease agreement will often be much lower than a finance purchase agreement or paying for a car in full.

3. Improved cash flow

Without the large outlay of purchasing vehicles, you increase your financial resources to invest in other areas of your business.

4. Maintenance packages

An additional product that many companies take out with their lease - or arranged alongside it - is a maintenance package. This covers any regular maintenance, servicing and MOTs that the vehicle needs during the lease contract. Budgeting for maintenance work is made simpler for your business without large, unexpected bills, with regular monthly payments instead. 

Additionally, a maintenance package gives drivers one phone number to call for all their vehicle maintenance needs so helps streamline the process for them as well.

Please be aware, some works aren’t covered by the maintenance package but this will be clarified when taking out the package.

5. Customisable terms

When you take out a lease agreement you will be able to choose the specific model and spec of the vehicle, the length of the agreement and the annual mileage.

You can choose these terms for each of your lease vehicles so that they are tailored to the individual driver or pool vehicle needs, helping your fleet meet its goals.

6. Reclaim the VAT

If a vehicle's leased by a business then up to 100% of the VAT can be reclaimed depending on how the vehicle is used. If it's only used for company journeys then you can reclaim 100% of the VAT paid and if your driver also uses it for personal travel then you can claim back 50% of the VAT.

7. Offset the cost against tax

Limited companies can offset the monthly rental against their end of year corporation tax while sole traders and partnerships can offset the monthly rental payments against their yearly taxation.

The amount you can offset will depend on the CO2 emissions of the vehicle. If it's below 110 g/km then you can claim 100% back and if it's over, you can claim 85% (unless it is a van - then you can offset 100% of the cost no matter the emissions).

8. Road tax included

For the duration of the lease the road tax will be covered by the lease funder at the price it's originally taxed at, so there’s one less admin task and one less cost for you. Please note that it will be at the price that the vehicle was first taxed at so if there is an increase during the lease then you may be charged the amount it increases by (still minimal compared to the full cost).

9. No depreciating assets

As you don’t own the vehicle, the business will not have it listed on the books as an asset which is depreciating in price, as new vehicles do.  Leasing is a great choice to avoid having an asset, or multiple assets, that are losing value.

10.  Easy end of lease process

When a vehicle reaches the end of the contract there’s a simple and straightforward process where you can arrange for it to be collected from the business address or the driver’s home address. If the vehicle is being replaced with another lease then to make it even easier you can arrange collection and delivery for the same day.

By understanding the benefits of leasing a car, you can make informed decisions that enhance the efficiency and financial health of your business.

Factors in addition to the benefits of business leasing

We’ve highlighted a wide range of business leasing benefits but what else do you need to think about before deciding if it’s the right choice for your company?

  • Do you want your business to be the official owner of the vehicle(s)? If so, then purchase options such as contract purchase or outright purchase could be better.
  • Have you fully evaluated your budget to ensure that you can afford the monthly payments and the initial rental amount? Ensure that your accountant and any finance teams have signed off on any potential business lease deal.
  • Decide how long you need the vehicle(s) for. Whether it’s for 12 months or 48, Xcite Car Leasing can provide you with the perfect contract length.
  • Highlight the type of car you need. Whether it’s a luxury car for executive travel or a commercial van for deliveries, if you know what you’re looking for our expert team can recommend the perfect models to help hit your business goals.
  • Understand the tax implications of business leasing. Companies can reclaim up to 100% of the VAT on any leased vehicles, which is a huge plus.
  • Plan for what will happen at the end of the business lease agreement. Once you hand the car back, you’ll need a plan for what to do next so that your business isn’t operating without vehicles that might be needed.

Benefits of leasing an electric car for a business 

We’ve covered all the general benefits of leasing business vehicles but what about the specific benefits of switching to fully electric vehicles (EVs)? 

  • If you’re looking at electric car lease deals, your business can also save money on taxes like Benefit in Kind (BIK). 
  • Ultra Low Emission Zone and Clean Air Zone charges will be irrelevant for your business and can lead to further savings too. If your drivers are travelling through these areas regularly then you can save quite a lot of money by leasing EVs rather than petrol or diesel vehicles.
  • Those aren’t the only areas for monetary savings though, as you can also save on running costs over time, due to charging generally being cheaper than petrol and diesel.
  • Zero tailpipe emissions of electric vehicles can help your business reduce its carbon footprint and hit corporate sustainability goals, enhancing its image in the eyes of customers and potential partners.
  • Generally, EVs are smoother to drive and offer a quieter environment, leading to improved driver satisfaction.

If you want to learn more about business leasing and how we can help you, take a look at our business leasing guides or check out our blog for the latest news.