SME companies have a constant battle between balancing cash flow and spending capital to grow a business. Car leasing gives a company freedom, whilst allowing them to keep hold of essential capital.
If a company decides to lease a car, 50% of the VAT associated is recoverable. However, if a company purchases a new car and this vehicle is used privately, then 20% of the cost cannot be recovered. Car leasing in Leicester can mean a company can buy a brand-new car but within the first 2 years of its life it will lose up to 50% of its value. This 50% loss is essentially a company throwing money down the drain. By leasing a car, an SME is only paying the monthly instalments, therefore keeping the money within the company. As a leased car is not owned by the company it will not appear on the balance sheets. The advantage of this is that the monthly instalments are considered an expense, and these types of expenses will usually be deducted from an SME’s profit.
Benefits of choosing to lease a car:
Allows a company to spend money more productively on growing the business.
Leasing a car can give a company the opportunity to offer a competitive package when hiring new team members, by allowing them to drive a brand new car.
Leasing brand new cars allows drivers to enjoy up to date safety features and technology advancements.
Choosing the right brand/model of a car can improve the reputation of a company and can be an example of the quality they are aiming for.
Brand new cars tend to be more fuel efficient, saving important money for an SME. New cars also tend to require less maintenance, which will, therefore, reduce the repair bills for a company.
There are essentially two questions for an SME (Car leasing in Leicester):
Will the car be shown as an asset?
If a car is leased, will it be privately or through the business?
These questions essentially should be answered by the SME themselves on a case by case basis. Leasing a car through the business will give employees a benefit in kind tax due to the private use of the vehicle. At each stage, an accountant’s advice should be sought to ensure you are making the right choices for every party involved.