Could 2011 be the year to take up business car leasing?
With many businesses considering new strategies for the year ahead, now might be the time to think about business car leasing.
Low initial deposits, affordable monthly payments and a number of tax breaks can make business car leasing an attractive prospect but is it right for your business?
Many businesses are settling back into work this week following an enjoyable Christmas/New Year break and are starting to look at what 2011 has in store for their business. January is a time for reassessing and deciding which is the right direction for your company over the next 12 months. ‘Do I need a new business strategy?’ and ‘How many new employees do I need to take on?’ are just a few questions many businesses are asking themselves this week.
Other vital questions which are sure to crop up involve company vehicles.’How many company cars do I need to take on?’ and ‘How should I fund my company cars?’ are just two of the questions which are bound to be asked across many boardrooms across the country in the coming months. Whatever company vehicle you decide on, business leasing is the obvious answer. Business leasing takes away many of the hassles and restrictions that come with traditional vehicle purchasing and can give businesses much more freedom in these times of austerity.
Whether you’re looking to lease a fleet or a single vehicle initially, you’ll find a whole host of benefits which make business leasing a great choice. These include a low initial deposit, tax advantages and increased flexibility. Despite business leasing being a hugely popular option, it’s not right for everyone. To make the right decision for your company you’ll need to consider a number of aspects before you take the plunge into business leasing.
1. Your current and future requirements: You need to think about your current company vehicle requirements. Do you really need a vehicle or could you just compromise with what you already have? In addition to thinking about what you want at the present time think realistically about what you’ll need over the next 12 months. Once you’ve done this, visit car leasing companies to see if they can work out an effective leasing plan which lets you add extra vehicles to your fleet throughout the year.
2. Maintenance: If you’ve decided that business leasing is the right option for you, you need to think about maintenance. Some leasing contracts include maintenance and are generally more expensive than those that don’t, however they can work out more worthwhile in the long run. It’s a good idea to check if your car lease contract includes glass and windscreen replacement as many don’t – also check the terms and conditions on breakdown recovery, particularly if you have quite a mobile workforce.
3. Total costs: When considering business car leasing it’s important to work out the total costs each month. Many car leasing companies will advertise a certain monthly rate, however the actual rate you pay is often much more expensive due to the inclusion of an initial document fee which can be spread out over the length of the contract.
4. Mileage allowances: It’s important to try to accurately work out car mileage allowances when taking out a business car lease. Estimating a low figure might mean you end up paying cheaper monthly costs initially, however car leasing companies often impose very expensive fines for businesses that exceed their mileage allowances.
5. Fleet discounts: When looking at leasing a fleet of business vehicles it’s worth calling car leasing companies to see if they offer discounts to firms who lease a certain number of vehicles. A simple phone call could lead to a huge discount, which, in turn, could leave your business with increased capital in the bank.
6. Insurance: Insurance is another major factor which needs to be considered when leasing vehicles. Leasing a flashy car might be fairly cheap in terms of leasing but it can become quite expensive when you factor in insurance premiums. It’s also important that you ensure you insure your company vehicle(s) in line with the car leasing company’s requirements – if you fail to do this, the business lease could become null and you could end up paying a fortune.
7. GAP insurance: When thinking about business leasing it’s important to consider GAP insurance. Simply speaking, when you write a car off, the lessee is liable for the difference between how much the insurance company will pay out and how much the car leasing company valued the car at. GAP insurance is normally reasonably priced and is taken by a large majority of companies who know they might not have the expendable capital to hand should an accident occur.
8. Tax benefits: When taking out a business lease, it’s worth doing your research to see what tax benefits you could be entitled to. Most businesses presume they’re entitled to lots of tax breaks when it comes to business car leasing, however the reality could be very different. Broadly speaking VAT registered companies can only recover 50% of VAT on the finance rental but 100% of the service element of the rental. It’s well worth ringing up a range of car leasing companies to check what you’re entitled to before you sign any car lease.
9. Vehicle Excise Duty: Vehicle Excise Duty is a compulsory fee which needs to be paid when business leasing – you need to check your car lease includes this and you need to add it on to your overall fees if not.
10. Early termination charges: It’s important to check what kind of early termination charges the car leasing company has in place should any business wish to terminate their contract early. Some companies can impose large fines so it’s always worth familiarising yourself with the terms and conditions ahead of signing the car leasing contract.