Buy or Lease Your Company Car: What Should You Consider?
Many businesses need a company car either as a direct part of their operation or simply as a means of transport for employees. One of the biggest considerations that businesses need to make when looking to invest in a new company car is whether to buy or lease – read on to find out all that you need to know to make the best decision for your company.
Buying has the obvious benefit of being your own car to do with as you please, which means that you can customize it with branding and there will be no mileage limits (you can also sell a company car and put the funds towards a new one). There are also tax benefits to buying a company car in that you can claim Capital Allowances to gain tax relief on the cost of the car (but you must only use the vehicle for business purposes).
The main drawback of buying a company car is depreciation as the vehicle will constantly be falling in value (as much as 35% after just one year). If you do decide to buy, you should always provide GAP insurance to cover the cost of depreciation as this would see you receive the original amount paid in the event of a write off.
In terms of leasing, there are a few benefits to be aware of. The main benefits are that you can arrange a new lease every few years, which allows your company to always be driving the best and latest vehicles for improved performance and a better brand reputation. You also do not have to worry about depreciation and you don’t have to worry about the cost of repairs and maintenance. You can also deduct the cost of the lease from your profits and claim back 50% of the VAT.
The drawbacks of leasing are that you do not technically own the vehicle, which means that there is no resale value and there will be restrictions and limitations in place as to how you use the vehicle. It is also less likely that you will be able to negotiate on the cost of the lease unlike if you were to buy the car.
Ultimately, it will come down to your personal preference and the needs of your business. There are benefits and drawback to both, but if you want to be able to customize the vehicle and use it as you please then buying could be best. If you like the idea of being able to upgrade your company car every few years and you want to avoid depreciation then you will find that leasing is best. Hopefully, this information will help you to make the right decision and get the right car for your company.