Car leasing v car purchase: What is the better option? | Release Press

(PRWEB UK) 16 August 2012

Report: RALPH MORTON

How?s the company?s finances?

Running an SME business really isn?t easy at the moment. And all those government initiatives to help finance small businesses via the banks. Well. Have the company been successful in securing any?

Quite. Anyway, back to the original question

How?s the company?s finances? Tick one of the following.

Healthy [ ]

OK [ ]

Requiring finance to expand [ ]

Requiring finance to exist [ ]

If the company?s finances are healthy and business is cash rich, and if when purchasing cars for business as well as for staff?s company cars, then now might be the time to stop reading now. Especially if a good discount has been secured from a dealer or manufacturer terms if a lot of company cars are bought ? and feel confident about getting a good price when they are sold..

If that?s not the position of the small business, then read more.

One funding readily available

Here?s the first good reason to consider business car leasing (which is also known as contract hire). It?s an additional funding line. There?s no drag on overdraft or other lending facilities. Given how difficult it is to attract finance for an SME, this has to be a GOOD THING.

Two smoothed monthly cash flow

Second, business car leasing is less capital intensive than choosing HP (hire purchase) or contract purchase (CP). With HP or CP paying for the full cost of the car, so the monthly outgoings are higher. It may also require a higher deposit.

That?s not the case with contract hire, where monthly car lease payments are lower because only the depreciation of the car over the time and period that it?s leased are being payed, and the finance that has been supplied.

And that usually means a much better car can be afforded with a business car lease because the monthly outgoing is reduced.

Three ? get on with life and the business

What to do? Run a business or run a car purchase operation? To buy cars the terms have to be negotiated with a dealer, arrange the finance, and then later on sell the car.

Its not being suggested that terms don?t have to be negotiated to get the right business car lease, although there are plenty of offers in the market: choose a car, choose the spec, and then choose the supplier that suits the business. But once in place, then its just paying the monthly lease and hand the car back at the end of the term. No selling or managing cars ?in life?.

Business requires 100% concentration: business car leasing can help do that.

Four ? get some VAT back

Try getting VAT back on an HP or CP agreement. This normally isnt possible in most situations. But can be done with a contract hire business car lease.

OK, it?s not the total amount (unless the business car is used exclusively for business purposes ? and very few are, so let?s dimiss that one). But 50% of the VAT levied on the monthly finance can be reclaimed.

Five not only VAT, get some tax back

Get capital allowances for the company car purchases. Which is really handy. What?s not so good is the amount of time it takes to reclaim that. If buying a company car with CO2 emissions of 160g/km, then claim 18% capital allowances on a reducing balance basis. Find out how long that will take? (Note: from April 2013 the tax break reduces to 130g/km.)

With a business car lease get 100% of the lease as taxable allowance on profit and loss account as long as the CO2 emissions are below 160g/km. That?s immediate. (Note: again, from April 2013 the tax break reduces to 130g/km.)

Now, Paul Hollick ? who is the sales & marketing director from leasing company Alphabet might well have reasons of self interest to support business car leasing. But, when speaking to Paul about car leasing versus car purchase, he did make this very good point.

?In healthier economic times, before the banks pulled the plug on a very large slice of SME company car financing, the tail risks of outright purchase were, if not necessarily financially justifiable, at least affordable,? says Paul.

?But today, surely the lower-risk method of acquiring company cars through lease financing is the sensible and correct way to fund business vehicles.?

If the SME business could do with some additional financial muscle, then business car leasing is certainly worth exploring it?s additional finance without affecting our existing credit lines.

A few key points about car leasing

Easy to budget your monthly expenditure

50% VAT recoverable on lease

Improved cash flow

Minimal capital expenditure

Gap insurance (optional)

Fixed interest rate

Less hassle you don?t need to become a used car salesman

VED included

Less administration for your company

Expert commentary from Fleet Alliance on car leasing v car purchase

As the article suggests its not just about the money and the credit lines leasing can make life more simple!

Martin Brown of Fleet Alliance: ?Pass the ?car problem? to your leasing provider and focus on your core business?

SMEs should pass the car problem ? or is it challenge? ? to their leasing provider and focus on their core business. A professional leasing provider will also offer strong fleet management software which could well allow an SME to manage all of their vehicles effectively in one place.

Another advantage a business car leasing provider can bring to your party is competitive tendering. This ensures you get the best funding deal for the car you want from a range of funding providers.

So, it can save you money, make life more simple and free up credit lines. Business car leasing provides a solution worth assessing for SMEs.

Click here to read about a real life example comparing leasing with purchase.

Source: http://freereleasepress.com/car-leasing-v-car-purchase-what-is-the-better-option/

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