Business Leasing

Whether you’re an employer who wants to individually lease a new company vehicle for yourself, or a business looking to set up a company car scheme with a fleet of vehicles, company vehicle leasing is a great cost-saving alternative solution to buying and maintaining a traditional company car or fleet.

Complete Business are car leasing experts that provide an exemplary personal or business car leasing service to all types of individuals or businesses including sole traders, partnerships, small to medium sized enterprises (SMEs), large businesses and corporations.

Fleet Leasing

Car fleet leasing is where a leasing company who owns new, modern vehicles leases out a group of vehicles to a business.

Smaller businesses tend to have between 1 to 50 vehicles in their fleets whereas much larger organisations, such as Royal Mail or the police, have hundreds or even thousands of fleet cars.

Many businesses that choose to provide a group of fleet vehicles will typically have many employees who either need to regularly transport themselves (i.e. a travelling salesperson) or products (i.e. a delivery driver), as part of their everyday job. However, some companies will simply offer a company car as a perk where a vehicle is not necessarily needed for work purposes.

Fleet car leasing is an increasingly popular high-end benefit offered by reputable, successful companies looking to sharpen their brand image and/or seeking to attract and retain top talent, without the need for a large capital outlay and minimum fuss or hassle.

Historically, many companies bought cars for their employees to use, or their employees used their own vehicles for work purposes (the latter type of arrangement is known as a ‘grey fleet’ of vehicles).

However, due to car depreciation, grey fleet related health and safety risks and tax burdens, buying traditional, fossil-fuelled cars outright or allowing employees to use their own vehicles has become an outdated, expensive and unpopular company car arrangement for many businesses.

Note: For companies with a fleet of 50+ vehicles, you can seek guidance and support from the DVLA fleet scheme to help your business efficiently deal with the administrative burden of setting up a fleet.

Vehicle finance options

One of the key benefits of leasing or buying a car on finance is that rather than paying out a costly lump sum of your business capital, you or your company can more effectively budget for a company or fleet car by paying smaller, more manageable monthly instalments.

There are three different company car or fleet finance options to choose from, depending on whether or not you want the option to keep the vehicle after the lease term expires, or you may want the option of paying low monthly instalments and a large lump sum payment when the lease ends.

Choosing the right finance option (i.e. whether to buy, lease or finance car for business use) needs careful consideration, taking into account the particular benefits one finance option may have over another.

Car fleet or individual company car leasing isn’t a ‘one size fits all’ and each individual or fleet leasing arrangement will be specifically tailored to meet the individual needs of you or your particular business, heavily influenced by maximum cost benefits such as tax and VAT savings.

There are four main types of vehicle finance, one of which is a company car scheme:

• Contract hire
• Finance lease
• Outright contract purchase

Contract hire

Business contract hire (BCH) or personal contract hire (PCH) is easy to manage and set up and is the most popular choice for many, with approximately 80% of UK businesses choosing this arrangement.

Contract hire is a long-term rental arrangement whereby you or your business will never actually own the vehicle; it will simply pay to use it for a fixed term.

The contract sets out the fixed monthly payments that are predominantly based on the size of your initial deposit payment and estimated usage (mileage).

Contract hire benefits

• Fixed monthly payments mean easier cash flow management
• Smaller deposit than what you’d pay if purchasing
• No administrative burden as business contract hire car deals cover the administration
• Healthier balance sheet as car not shown on the balance sheet or seen by potential investors
• No depreciation risk as you’re not buying the car
• No road tax to organise as dealt with by leasing company
• Hassle-free as no buying, selling or part-exchanging to worry about
• Maintenance cover and roadside assistance can be included
• Tax savings as you can claim up to 100% tax relief on fleet cars lease (rental) payments
• Corporation tax savings as you can claim up to 100% of lease costs based on CO2 emissions
• VAT savings as can reclaim 50% VAT on cars and 100% on commercial vehicles
• VAT maintenance savings as can also reclaim 100% of the VAT on maintenance costs

Finance lease

A finance lease agreement is only available on commercial vehicles and gives more flexible payment options together with the option to extend the rental period at the end of a lease; unlike a contract purchase, your company will never own a fleet lease vehicle on a finance lease agreement.

You can choose to pay lower monthly instalments and then pay what is known as a final ‘balloon payment’ at the end of the lease, based on the predicted resale value. Alternatively, you can choose to pay higher monthly instalments to cover the entire cost of the vehicle, plus interest, over an agreed term.

Unlike a company or fleet hire contract, you will need to include a finance leased vehicle on your firm’s balance sheet as an ‘asset’. Whilst this can be good if you want to increase the value of your company’s assets, cash flow needs to be taken into account when deciding on monthly payments.

One of the biggest advantages gained with this type of finance is significant tax savings.

At the end of the contract, there may be a disparity between what the vehicle is worth and the final amount to be paid. The good news is that if the vehicle is worth more than the final ‘balloon’ payment, you will either receive a refund payment or have a credit carried forward to a new lease. However, if the vehicle value is less than the final balloon payment, you will have to pay the difference.

Finance lease benefits

• Flexible payments to suit your business’s budget or cash flow
• Smaller deposit than buying (usually three months’ worth of rental payments upfront)
• Tax savings as the entire cost of the car fleet prices can be offset against taxable profit
• VAT savings as you can potentially claim 100% of the VAT on rental and maintenance
• No mileage restrictions (unlike contract hire) but heavy mileage will affect the vehicle’s value
• Flexible term as you have the option to extend the use and continue to lease vehicle for an agreed rate
• Increases company assets as it’s included on your company’s balance sheet

Outright contract purchase

Outright contract purchase is a form of finance suitable for VAT registered companies who want to avoid vehicle depreciation and make VAT savings.

After paying an initial deposit, your business pays VAT-free fixed monthly instalments for a vehicle.

When the outright contract purchase ends, you can choose to buy the vehicle for an agreed amount, subject to payment of the pre-agreed balloon payment and any disparity in the vehicle’s value.

Outright contract purchase benefits

• Fixed monthly payments for better cash flow management
• Option to own the vehicle outright at the end of the contract or return your vehicle to the leasing company
• Maintenance cover can be included in your contract
• Tax savings as the value can be treated as an expense against taxable profits
• VAT-free monthly payments but not on optional service or maintenance deals
• Increases company assets as it’s included on your company’s balance sheet

8 Reasons why leasing is better than ownership

• You get to drive a brand new car without the worry or expense of car depreciation
• If you use a leased car for business purposes, you could make tax savings
• Full manufacturer’s warranty cover, usually for the length of a lease
• Simplifies budgeting with a regular, fixed monthly payment
• No stress or hassle is involved by having to sell the car at a later date
• Monthly payments are typically cheaper than car finance
• Less initial outlay (deposit) than if you purchase
• Optional competitive maintenance packages can be included

Individual Staff Leasing

Individual staff leasing is a cost-effective type of business car leasing arrangement for a self-employed individual, or a partner or director, who solely want to lease one company car for their own business and personal use.

However, if you have never leased a car before, you might not want to jump in at the deep end by committing to a long-term, two to four year lease. If this is the case and you just want to dip your toe in the water, short term car leasing could be a great solution for you.

Business car leasing can be a much cheaper alternative to personally leasing a car as a private individual, especially if you choose a pure electric or hybrid vehicle with zero to ultra-low CO2 emissions.

Amongst obvious benefits such as getting to drive a brand new car without worrying about car depreciation, you can additionally make HUGE cost savings on both tax and VAT although the rental itself is typically more expensive than a long-term arrangement.

You may qualify for a business car lease as an individual if you’re a:

• self-employed sole trader, freelancer or contractor*
• partner in a Partnership
• director in Limited Company
• a partner, director or member of a VAT registered business
• director of a Public Limited Company (PLC)
• member of a Limited Liability Partnership (LLP)

Short term leasing

In these uncertain times, leasing a car short term is proving to be an increasingly popular option for many businesses or individuals looking to take out a business car lease.

Some of the many reasons car leasing short term can be a great, more flexible alternative to long term leasing are:

• you’re waiting for the arrival of a new vehicle and want to drive something respectable in the meantime
• you have a poor credit history or not enough of a credit history
• you’re not sure about your future financial circumstances (i.e. you have a fluctuating self-employed income)
• you want to provide a company car to a new member of staff who is still on their probationary period
• you like to change your car regularly
• you’re a new start-up company with inadequate accounts

A short term car lease can be for as little as 28 days, or for 3, 6 or 9, 18 months up to a maximum of two years.

Short term leasing benefits

• Fixed monthly payments for easier budgeting
• No large down-payment
• Flexibility with no long-term commitment
• Can regularly change your car
• Suitable for personal or business use
• Cheaper than standard daily rental fees
• Tax savings on pure electric or low emission cars
• VAT savings of 100% for sole business use or 50% for mixed use (i.e. personal and business), and 100% VAT savings on any optional maintenance packages

If you’d like to find out more about individual staff car leasing or short-term car leasing, then get in touch with one of our car leasing experts for a friendly, informal chat or simply request a quote online.