Car leasing for businesses, or Business Contract Hire as it is otherwise known, allows companies to lease cars for their staff. It is a cheaper alternative to buying cars outright for employees’ use and packs a number of benefits.
What is Business Contract Hire?
Business Contract Hire is essentially a credit agreement between a business and a finance company. The cars purchased are owned by the credit company, but used by the trading business in question in return for a fixed fee.
Why is it good for my company?
The number one reason BCH is beneficial to your company? It’s significantly cheaper than other methods of buying a car. With BCH, companies are able to obtain good cars for a good price. The leasing fee is formulated to cover the amount of money that the car is expected to lose during its lease as a result of depreciation; as such, it’s considerably cheaper than purchasing a car on a finance agreement or outright. You’ll also be able to claim back 50% of your VAT, helping your business to save even more money. You’ll also be able to claim back tax elsewhere, too, by claiming your repayments as a company expense. Another reasons why BCH is good for your company is that cars purchased via a lease agreement don’t count as business assets and therefore don’t affect your balance sheet.
What other perks are there?
Most companies offer companies a maintenance package to cover all routine maintenance requirements, including servicing and any required repairs. You’ll be able to choose the colour of your vehicle, too, but some companies will charge an additional fee for certain colours.
What should I bear in mind?
When it comes to opting for a leasing agreement, you need to think carefully about which cars you choose. You can lower your repayments by choosing a car that’s more likely to hold its value and therefore less likely to depreciate during your use of it. Companies are also entitled to claim back more tax (100%) on cars with good CO2 ratings, so choose a car that’s environmentally economic to help save your business a bit of extra cash. You also need to remember that you’re liable to pay for any damage that’s sustained to the vehicle during its time in your lease. From a business perspective, you may have to outline strict guidelines for employees to adhere to when using the car and make it clear to employees that there may be some circumstances in which they will be required to pay for repairs. Taking out a maintenance package can cover the cost of some housekeeping aspects, but they very rarely cover accidental damage. You’ll also need to bear in mind your mileage agreement, too; if this is exceeded, you will have to pay. Leasing companies, such as Vantage Leasing, won’t check your mileage regularly throughout your lease agreement, so it’s down to you to make sure that mileage is checked to avoid it spiralling out of control. If you or your employees appear to be on the verge of exceeding your mileage limit, speak to your leasing company.