Company Car – Should You Lease or Buy?
It’s time to get a company car, but do you lease or buy? Well, that will depend on many factors, including finance, who the car is for and mileage.
A big part of choice will always come down to finance. Do you have the capital to buy a car outright, or will you need finance? Is the monthly lease fee an affordable business expense? The budget you have will likely dictate your options, but here are some other factors to consider.
• Only a small upfront cost, if any, followed by fixed monthly payments, which makes it easy to budget.
• Included in that monthly cost you have all the benefits of a new vehicle, including the manufacturer’s warranty which is usually between three and five years.
• Easy to add on a service and maintenance package, so you know exactly what your costs are going to be with no nasty surprises.
• You can claim back part or all of the tax you pay against the vehicle. The figures will depend on your company’s VAT scheme. For more details on this visit the Government website https://www.gov.uk/reclaim-vat/cars.
• As leasing companies buy thousands of vehicles every year, this often means you can find a better deal for your business.
• Most of the leasing companies these days will offer you a variety of options at the end of your lease. Either to buy the car outright, return the vehicle to them or re-finance and lease a new car.
• There is no depreciating asset on your books. The resale value is the problem of the leasing company.
• Your mileage is a big factor in whether or not you can lease a car as well as a factor in how much you will pay. The more miles you do, the higher the monthly fee will be. Some companies won’t even lease to you if your mileage exceeds 30,000 per annum. This means that companies who are based in rural locations that are required to cover a lot of mileage could be negatively impacted.
• The vehicle is not an asset that you own. Therefore, you are not able to use it to cover any debts if the business gets into financial difficulty.
• When you buy a vehicle, you can buy it outright if you have the finances. Leasing a vehicle means that you are committed to spending X amount of pounds every month (sometimes hundreds) for the duration of the agreement. This is not negotiable, so be careful that you can meet the conditions of the agreement. If for any reason you need to end your agreement early, you may incur an additional cost.
• You need to have an accurate measure of your mileage so that the limit can be set. It is sometimes possible to re-negotiate this. You will incur a fee if you exceed your limit.
• Any damage to the vehicle that is considered over ‘standard wear and tear’ will need to be paid for at the end of the contract.
• You can buy the vehicle outright and have no regular finance payments.
• It is your choice what vehicle to buy; you have full control, and you may be able to negotiate a discount.
• The price of the vehicle is a tax-deductible business expense.
• Any profit made on the resale of the vehicle is yours to keep.
• The vehicle is a business asset and can be taken to pay outstanding debts.
• As you own the car, you can sell or trade in whenever you want to; you are not tied to a lease agreement.
• There are no mileage restrictions on a vehicle that you own. The only restriction is for resale value.
• The initial outlay, if buying outright, uses money that you may need later on. Plus it is a large sum of money that you would need to have available.
• If buying on a finance scheme, this ties your credit ability up.
• Cars depreciate around 40% in their first year; you will be the one who has to swallow that depreciation cost.
• The cost of maintenance increases as the vehicle ages.
• You will need to find a buyer when it comes time to sell your car.
The choice of buying or leasing will be dependant upon your own personal needs and financial commitments.
One last factor to take into consideration is, who is going to be using the car? If you, the owner, use the vehicle you can control the mileage. Whereas you may not be able to monitor an employees mileage. Especially if they are using the vehicle for personal use.
Whatever option you choose, selling your existing car with Top Deals deals 4 Wheels will ensure you have a hassle free sale and get the very best possible price’.