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Car leasing for business purposes is a very popular choice and the deals offered by dealerships and finance brokers tend to be slightly cheaper compared to personal leasing. The monthly price however is not the only thing you need to worry about when it comes to financing a car on your business. A car, like any other equipment or building, is classed as an asset and your business will be inclined to pay "benefit in kind" taxes and if you weren't already aware, you can't claim back the full 20% on VAT.
Depending on your business circumstances and the advice given from your accountant, after comparing all options, if you are a new small business with one or few employees, it may be a better option to consider leasing a car on personal contract hire, which does not affect your business financial accounts.
"You can get a car on personal lease and use it for your business or at work"
To get an idea of cost related comparison visit TFS Vehicle Leasing who offer a great range of lease cars on different personal contract hire term lengths, with flexible mileage allowances.
Personal Car Leasing
Although the deals on cars for personal use may seem slightly dearer because of the VAT, it can still offer more flexibility and save your business money on taxes and be a better option looking at the bigger picture.
Getting a car on personal lease gives you the flexibility to use the vehicle for both business or commuting to and from work, as well as socially for domestic and pleasure. This comes with the expense of increased mileage, which will affect the cost of the vehicle but you are paying for extended use.
Another advantage of personally financing a car and using it for business purposes, is that you can choose to go for a lease purchase deal, which basically means you can buy the vehicle at the end of the initial lease term by making a balloon payment.
Business Car Leasing
A car financed on your business should be used solely to carry out work related journeys, which is basically commuting from your place of work to anywhere in relation to your work and back. Therefore personal use of the same vehicle may not be permitted.
If you declare a car in your business accounts and are claiming the VAT back, you are not entitled to claim back costs for mileage and maintenance incurred whilst using it for work.
When purchasing the vehicle outright, say for example 2 or 3 years later, you would in most cases pay tax on the initial purchase price, not the re-evaluated price, which means you are not paying tax on the current value.
Summary
Buying - If you intend to buy the vehicle you will save on taxes when applying for personal lease and be better off in the long run.
Business Lease - If you are covering more than average mileage and changing the car every 1 or 2 years then a business lease may suit you better.
Personal Lease - If you also intend to use the vehicle for social, domestic and pleasure, then personal leasing may be an obvious choice.
