Business First Family Business, Accounting, Finance, Investing, Marketing And Management
A vehicle is an important asset needed for the day-to-day running of a business, especially when you work for yourself. As a result, self-employed entrepreneurs can obtain a business car lease. Leasing a vehicle for business is an excellent option if you do not want to purchase a car outright and only need one for your business.
Considerations While Obtaining A Business Car Lease
Leasing a business vehicle may seem complicated, and in many cases, business owners do not get the best option available. Here is a list of considerations while obtaining a business car lease.
Compare Lease Costs
You need to compare costs for the best pick. Several sites offer you this option. An example is https://www.leaseloco.com.
Maintenance Packages
Company cars travel many thousand miles which could translate to sizable wear and tear on your leased vehicle. Normally, you would be required to fix these damages before returning the vehicle. However, the alternative is to opt for a lease with a maintenance package. Here, you will be paying a fraction of what you would normally incur if you were to fix the damages yourself. You simply need to take the vehicle in when you see a need for maintenance before the problem devolves.
Benefits Of Self-Employed Business Leases
The following are some benefits of leasing your cars for use by a self-employed business owner.
50-100% VAT Offset
A common reason to choose a business lease over a personal one is that it allows you to reclaim Value Added Tax (VAT) on your monthly rentals. While the price offset might be minimal, it begins to rack up when you take the lease for several years.
The Lease Is Off Your Balance Sheet
Business leases do not appear on your company balance sheet. This means that it does not negatively impact your business’ accounting and would not be a blockade if you seek credit or financing.
Zero Company Car Tax
Benefits in Kind (BIK) tax are benefits enjoyed by employees of a company that are non-cash but have a monetary value. An example is access to and use of a company car. Because some financial benefit is enjoyed, it is treated as taxable income. As a self-employed business owner, you are indistinguishable from your business, which means you pay zero company car tax for the business. This is crucial for small, growing businesses as it enables you to put the money saved back into the company for successful running.
Available Business Lease Options
Below are lease options available to self-employed business owners. They are:
Business Contract Hire
This is the most common lease type. Chances are that every time you have heard about leasing, they were talking about a business contract hire. It involves agreeing to pay a fixed amount of money for some time. Afterwards, the vehicle would be returned per the agreement in the contract, usually regarding mileage restrictions.
Operating Lease
This is identical to business contract hire, except that vehicle excise duty is covered in the first year only.
Finance Lease
A finance lease is an excellent choice for business owners as it is exempt from the conditions and mileage restrictions you get with a business contract hire. What makes this different compared to a business contract hire is that you end your business loan term in either of these two ways:
The first option is that you can get a buyer to buy your car. You would use this payment to cover your balloon payment. If you sell it for less than agreed, you will need to make the payment whole, while you will get equity if you sell the vehicle for more. The other option enables you to pay a small fee to keep the vehicle for another year, after which you make the balloon payment.
What Are The Requirements?
The following are common documentation requested when looking to take out a business lease:
- Recent trading accounts
- Proof of address and ID
- Recent banking statements, usually in the last three months
You are not only eligible for a business car lease, but it is also advisable to do so as a self-employed business owner. Business car leases propel your business in more ways than one. It enables you to polish the outlook of the company. At the same time, it helps you save money. Therefore, you can reinvest to ensure business growth and profit.
