Many business owners are often faced with the decision to buy or lease their cars personally or through their business. Like all things, there are pros and cons associated with leasing a car as a business.
One of the biggest factors people consider is the ability to make tax reclaims when they lease a car through their business. However, there has to be strong evidence to prove that your car is solely for business purposes. On the other hand, owning a vehicle gives you complete control over its use.
Here are some pros and cons of leasing a car as a business:
- Cash flow
As a start-up company, one of the major deciding factors of whether you should buy or lease a car is your cash flow. Not having to spend too much money immediately can help your business manage its finances better. With a lease agreement through your company, you make small deposits monthly to use the car for your daily operations.
- Tax benefits
Leasing a car through your company makes you eligible for various tax benefits including corporation tax, VAT relief and fuel costs. Also, if you keep to the recommended CO2 emission levels, you can claim tax deductions. These returns enable you to save money for other much needed expenses in your business.
- Easier financing
If you had some issues in your credit history, especially personally, leasing through your business is a better option. You also have the opportunity to obtain better financial terms than if you were trying to purchase it outright in your personal name.
Car leasing agreements usually come with favorable terms of support. They may include technical support and customer service solutions. In the event of an unforeseen situation, you can call the company’s toll-free support or in-service team for assistance.
- Flexible terms
Leasing companies usually provide terms that are favorable to your business operations- this includes budget, open-end leases, closed-end leases, payment terms and so on. Take note of all the risks involved before you commit to any contract.
- The Total Cost
In the long run, it may cost you more to lease a car than a full purchase. It is smarter to lease a company car only when you are using it for a limited period. Otherwise you may be hit with the costs involved in keeping a vehicle roadworthy through its MOT test.
- Termination fees
Terminating your contract before the agreed term expires usually attracts a financial penalty. Even when you don’t use the vehicle, you are expected to make payments every month. Be sure to select a term suitable to you and when you need the car most.
- Complicated terms
Understand the full terms and conditions of the lease contract before appending your signature. Many business owners found themselves trapped in a difficult contract because they didn’t take the time to scrutinize the details.