40 . Glasgow Business January/February 2014
THE KEY TO CAR FINANCE
Discover how best to pay for your company fleet T
aking control of the vehicles your company provides to staff for business use can help you
save money – but choosing the best way to finance your fleet can also be complicated. Te various funding options
can have a significant impact on the cost, and there are wider issues to consider such as administration, exposure to residual value risk and implications for your tax and VAT. Tat makes it vital for any
company considering financing its fleet of vehicles to look at which option works best for its specific requirements. For some, it will be a clear-cut decision which serves their business best, while for others it may be a bespoke solution which blends different funding options to deliver optimal cost benefits. “Whether you’re the finance
director who’s spending the company’s money, or the user-chooser torn between considering what you fancy and the associated tax implications, you should have two best friends you can turn to for advice,” said Alastair McKenzie, proprietor of Car Consultants, a Glasgow-based vehicle sourcing company. “One is an accountant who can
steer you through the minefield of ever-changing legislation, allowances and benefits. Te other is the vehicle supplier who, aſter all
is said and done, is going to supply you with the right vehicle at the right price.” Regardless of which funding
choice they opt for, business owners should resist the temptation to select a new car or van until they have worked out the whole life cost of a particular vehicle, said Andrew
Hogsden, Senior Manager, Strategic Fleet Consultancy, Lex Autolease. “Understanding whole-life cost
requires analysing the expenditure required throughout the vehicle’s life, not just the initial outlay, and includes factors such as fuel costs, National Insurance contributions, capital allowances, maintenance costs and depreciation,” he says. “Once all of these factors have been evaluated, business owners will be in a position to make the most efficient and cost-effective choices.” Te standard funding options
include: Outright purchase
Contract hire Te company simply hires the car for a predetermined period and mileage at a fixed monthly rental. Te monthly rental payments
are liable to tax, although half of the VAT on rental payments, and all of the VAT on maintenance, can be reclaimed.
An outright purchase describes the straightforward situation where the company directly buys the vehicle. Tere are tax implications for this type of funding – tax deductible capital allowances are permissible only up to a total of 25 per cent of the value of the vehicle, or £3,000, depending on which is higher.
Finance lease
Finance lease is a funding option that allows the company to lease a vehicle for a fixed monthly fee.
Contract purchase
Contract purchase is a deferred purchase funding option that is structured so the company makes fixed monthly payments for a predetermined period and mileage and at the end of the agreement it has the option to purchase the car or hand it back to the provider. Payments can be offset against tax.
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