Expert advice on the business of running a garment decoration company

Q&A

I need a new vehicle for my business – what are the main advantages of leasing and what do I need to consider before signing on the dotted line?

As with any company, transportation costs are just one of the many factors to consider when addressing cash flow. While it may seem logical to purchase one or even a fleet of company cars for your staff, leasing and contract hire presents itself as a far more cost-effective option in many cases, whether it’s for a short-term basis (ideal for start-ups) or for a period of two years or more.

Leasing and contract hire are great for cash flow as the monthly rentals are fixed for the term. For example, in long-term leasing, they are based over the depreciation of a specified period and the total mileage driven – drivers pay for what they use. Maintenance costs are also covered, including tyre replacement and repairs. With leasing, a business can offset monthly rentals against corporation tax, whilst 50% of the VAT can be reclaimed on the finance element of the contract, and 100% can be reclaimed for maintenance.

Tax considerations for businesses include Benefit in Kind (BIK) tax. If you are an employer/employee funding the car or van, you will have to pay tax on this taxable benefit, which comprises Class 1 National Insurance contributions towards the car’s cost. Employers using the car will pay BIK based on the car’s list price and its emissions output, with lower emissions vehicles incurring lower costs.

If you would like to apply branding to your vehicle, most leasing companies will allow this – ask permission first though.

Always read the small print: for example, check what your leasing provider charges for excess mileage – that is, above and beyond what was agreed in the contract. It is advisable to be upfront about your mileage needs, and you should always choose a company with the British Vehicle Rental and Leasing Association (BVRLA) accreditation.

To get the best deal, research is key – always start on the manufacturer’s website. Many sites will try to offer a deal to encourage enquiries but these are often little more than hooks. Instead, choose a site that gives you impartial advice, and be honest about your budget. It’s good to ask about offers too – these are usually updated monthly or quarterly, so ensure you keep an eye on changing prices to avoid being misled.

www.flexed.co.uk

Craig Moran is head of contract hire and leasing at short-term vehicle leasing specialists Flexed.
https://flexed.co.uk

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