Guest post by Ben Hiorns
Company cars are a great employee benefit for small businesses that can provide not only an added incentive for employees but an investment towards your future. But what makes sense for your company and your brand? To buy or lease?
Pros – Buying a car for a business is not only a bonus as it can be listed as a business expense on your tax return but it’s a worthy investment too. For example, if you decide you’ve outgrown a car in five years, you’ll be able to sell it to fund your upgrade. Going back to tax advantages, it’s also worth considering that mileage and other expenses can be written off. You might be able to claim 100% of the VAT on a new car if you can prove you use it only for business too.
Cons – All cars, but typically new ones, lose their value rather quickly. So quickly, in fact, that it loses a decent percentage of its value the moment it’s driven off the forecourt. In the first three years, a car can lose up to 60% of its value. And this is before you start factoring in the additional upfront cost. There are little helping hands such as Gap insurance to consider, however, which can help to cover the cost of that depreciation in the event of a total loss claim.
Pros – The obvious benefit is that leasing a company car allows smaller businesses access to newer, better cars with much smaller upfront payments, immediately. There’s also a great deal of flexibility in modern leasing, with contract lengths that can run up to 60 months. It can also be covered by warranty for the length of the agreement, which means you won’t end up forking out for any repairs and road tax and servicing are included in the fee. Better still, you can deduct the cost of the lease from your profits and claim back 50% of the VAT.
Cons – As is the case with all leasing offers, the car will always end up that much more than if you bought it outright and you won’t even end up owning it once it’s paid off, which means there is zero resale value. This is a major drawback of leasing and is the primary reason why it should be seen as an option for those businesses that need to get off the ground quickly.
Both buying and leasing company cars for your small business are sold options and which feels like the best fit for you will depend on several factors: What’s your capita like? How many miles will you and your employees realistically be driving every year? And do you see a car as a means to an end or an investment?
Whichever road you choose, however, there is an abundance of options and a market eager to fulfil your wishes.