As with any aspect of running a business, choosing the most cost effective method of leasing a car is crucial. Car leasing, either personal or for business, is now the leading method of car ownership. For a small business or a company fleet the most popular and tax efficient method is business car leasing.
What Is It?
For a deposit and an agreed monthly figure, a business car lease allows for the use of a vehicle for business purposes. In this way businesses can run new cars without having to fully invest in owning vehicles outright doing away with the inevitable loss through depreciation.
First impressions count so for appearances sake at a reasonable cost a small business can afford to run a prestige vehicle, so if you were to lease a Mercedes Benz for your business it would enhance how your client sees you.
Business car leasing has grown in popularity in this country because it takes away much of the risk connected to operating company cars. There is a known, fixed monthly cost which makes budgeting straightforward and does not risk an unexpected drain on finances. There is no risk at the end of the lease period because the disposal of the vehicle falls to the lessor. It is not usual in these circumstances for the user to buy the vehicle at the end of the lease period as might be expected with a personal lease contract.
Leasing a car in this way will usually include, obviously, the cost of the car plus the vehicle registration fee, VED, its period of use and agreed mileage.
Mileage has the biggest impact on the business car lease rate because the number of miles travelled has major implications for both service requirements and, ultimately, the resale value of the vehicle.
Agreed mileages, typically, might be from an average 10,000 miles up to, say, 40,000 miles a year based on lessee requirements.
Underestimating annual mileage may well reduce the monthly lease rate but it can also result in punitive excess charges at the end of the contract if the contracted mileage is exceeded.
The choice of model or brand may also be a factor. Any two cars might cost a similar price, but if one has a much higher forecast residual value, this would be reflected in a lower monthly rental rate. The monthly rate for most business car lease agreements will also include a ‘service’ element, which can usefully cover a range of additional services such as maintenance, roadside assistance and fuel cards.
During the period of the lease the user should treat the car as if it were his own because excess mileage and wear and tear will be taken into account.