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We’ve got a guide that fully explains business leasing but wanted to take a look at the benefits of leasing in particular to showcase why it could be the best choice for your company’s fleet. Speaking with our team we've rounded up the top ten reasons we would choose to lease as a business.
Lease agreements typically last between two and four years meaning that you’ll be able to update pool vehicles and company cars every few years to keep your drivers in the latest models.
New vehicles are not considered a better perk by drivers but come with a lot of benefits for your business to. They will not have any wear like a used vehicle does, come with the manufacturer’s warranty (which depending on length can last for the duration of the lease), and offer improved fuel economy to reduce fuel costs.
When you take on a lease agreement the price will be agreed upon beforehand and this will be a set monthly amount for the length of the contract. Being a fixed price means it is easy to budget the cost in your business’ accounts.
As you are 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.
Without the large outlay of purchasing vehicle and instead you have an additional line of credit and make regular monthly payments to this allowing you the other money to invest in other areas of your business.
An additional product that many companies choose to take out with their lease agreement is a maintenance package. This is an added benefit to your lease agreement, or done alongside it with another company, that covers any regular maintenance, servicing and MOTs that the vehicle needs during the lease contract.
This makes budgeting for maintenance work much simpler for your business as you will not get any large, unexpected bills, instead there are regular monthly payments that you can put into your budget easily. Please be aware there may be some things that aren’t covered by the maintenance package but this will be clarified when taking out the package.
Additionally, a maintenance package gives your drivers one phone number to call for all their vehicle maintenance needs so helps streamline the process for them as well.
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 to help your fleet meet all your needs.
If a vehicle is leased by a business then up to 100% of the VAT can be reclaimed depending on how the vehicle is used. If it is 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.
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 is below 110 g/km then you can claim 100% back and if it is over that you can claim 85% unless it is a van as you will be able to offset 100% of the cost no matter the emissions.
For the duration of the lease the road tax will be covered by the lease funder at the price it is 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 which is minimal compared to the full cost.
As you don’t own the vehicle the business will not have it listed on the books as an asset which is a good thing because as soon as they are bought vehicles begin to depreciate in price. Leasing is a great choice to avoid having an asset, or multiple assets, that are losing value.
When a vehicle reaches the end of the contract there’s a simple and straightforward process where you can arrange for a vehicle 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.
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