Why leasing vehicles makes sense for companies investing in business cars

When it comes to acquiring vehicles to keep your staff on the move and your business process running smoothly, the question is often raised as to whether outright ownership or the leasing of cars is the best way to go. Both routes throw up advantages and disadvantages but in many cases, leasing cars for business use will be the preferred option financially.

Image Credit

The diminishing returns on cars

Most cars acquired for regular use will depreciate in value from the moment the cash is exchanged. In addition, the amount of depreciation that will occur is unpredictable, as external market factors can mean faster or sharper value loss. By leasing rather than purchasing a company car, the business is in a position at the beginning of the lease contract, to set the overall cost of the car, including how much they will pay on return of the vehicle.

Cash flow considerations

Every business, and especially small to medium sized ones, need to keep a keen eye on cash flow. Companies considering buying or car leasing in Leicester or other cities where staff need to be mobile in order to successfully carry out their jobs, will have to balance the need for good quality, reliable cars with the amount of cash they can afford to tie up upfront. Leasing a company fleet removes the need to choose one or the other, as the business can have access to new or nearly new cars at a fraction of the upfront cost required to purchase them.

Tax Savings

The government spells out how tax should be paid on company cars. The government allows the entire cost of leasing to be deducted from taxable profits as long as the vehicle has low CO2 emissions (lower than 130g/km). If the vehicle is solely for business use, the company can claim back the VAT paid. Leasing companies such as https://leasing.totalmotion.co.uk/ work with businesses to ensure that they get the right vehicle and lease contract terms to suit their needs.

There are also savings to be made on National Insurance contributions, as employers are mandated to make Class 1A NI contributions for any benefit in kind provided to an employee. Therefore the lower the emissions of the car, the lower the NI contributions the business will have to make.