All the types of company car finance in one place plus the advantages of each
9th April 2019
Lots to consider when you lease or finance a company car or van
You may be a Director and want to finance a car or van through the business. You may be an employee on a business car allowance or you may simply want to increase the size of your fleet. Below are some of the ways and also the advantages of financing or leasing a company car or van.
Firstly, let’s look at the different ways you could finance or lease that new (or used) company car or van:
You could use your business banking loan facility. Banks often fall over themselves to give established businesses access to loans but this does mean that you will now have an asset on your balance sheet and that the car or van is depreciating from the moment you buy it.
It’s still a good option for established businesses with access to good rates but it does mean that if you need cash flow for other reasons (a seasonal downturn in business or a cash injection for new machinery etc) then you are likely to reduce what you can borrow when you really need access to cash.
You could also lease the car, and Leasetree can give you access to the following types of lease deals:
Business Contract Purchase (BCP)- This type of lease is very much the same as a personal PCP lease deal that most are familiar with. You can choose whether to hand back the car at the agreed term end or to keep the car and pay off or even re-finance the “balloon payment”
Lease Purchase (LP)– is similar to BCP but you don’t have the option to hand the car back so you must either pay off the balloon payment or refinance the deal.
Business Contract Hire (BCH) differs in that you must hand the car back at the end of the lease period. It has the advantage of you not worrying about depreciation or “balloon payment” or refinance issues. In a way, its the purest form of leasing as you will never own the car nor have the option to do so. You can find our Special Offers here or alternatively you may be after a commercial vehicle lease which you can find here.
Hire Purchase (HP) is the most traditional form of financing a car or van for business. You agree on a loan amount for a defined period, pay off the car or van in equal installments over the defined period and, in the end, the vehicle is yours. This option is of particular use to those who expect to do high mileage in their car or van as you don’t need to concern yourself with any excess mileage charges.
Advantages of Leasing
There are loads of advantages to leasing rather than purchasing.
If the car or van you are leasing is less than 3 years old then you don’t need to worry about the annual MOT which can take up a considerable amount of time when you need your company cars and vans on the road.
Car and Vans are continually being upgraded by manufacturers. If you think back to a time when cars came with the basic kit and you then needed to add in extras such as Bluetooth and air conditioning then you will know how far manufacturers have come in a bid to provide better value & add ons as standard in their cars and vans. The same will continue to happen – the latest trend is to include more and more safety features as standard from cruise control through to lane assist, parking assist etc.
Another point to make is that the government are looking to steer us away from Diesel cars and vans, especially ones with high CO2 emissions – just look at the growing trend of added diesel tax when calculating Benefit in Kind (BIK) or surcharges for entering congestion zones of diesel vehicles! It’s smart not to commit to a long term vehicle when the tax and surcharge rules may well be changed on you down the line.
When you lease, most leasing companies offer you maintenance packages so you don’t need to worry about unexpected and expensive surprises when it comes to your cars or vans.
There are tax advantages but we always recommend that our customers consult with their tax/ accounting advisors to make sure these are up to date as the rules can change. That said, some of the potential tax advantages include:
No need to siphon off valuable capital that might be best used for other things like investment in new machinery designed to grow your company.
The car or van won’t sit on your balance sheet which means that it’s not considered as a liability if you want to value your company or if you want to borrow to grow your business.
If you purchase a car or company van outright and its then used for business and personal use then you can’t claim the 20{ce1f5a97386adb343f3d9b12b92f2c65f76aa8e98ead3145386a848fb9911aa8} VAT back but if you lease the car then you can claim up to half of the VAT back even if the vehicle is used partly for personal use.
If you lease rather than finance a van or car, the monthly payments are often less than traditional finance methods like Hire Purchase which means you and your colleagues are able to drive better cars or you can invest in larger, more expensive vans for example.
How to apply:
We even offer no deposit deals through our partners at Leasetree so you can have all of these advantages without even having to pay a deposit – now that makes Business Sense!