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How The Manufacturing Sector Can Reduce Vehicle Costs

UK manufacturers are desperately looking for opportunities to reduce running costs. Rising energy bills, increased road tax and the potential for export and import costs will hit the manufacturing sector hard in the foreseeable future.

However, according to researchers, improving logistics should be among the priorities to lower the financial burden. Outsourcing transport management will prevent manufacturers from haemorrhaging money and remain competitive. 

Whilst company cars bundled into salary packages helps to attract top executives, buying a fleet of vehicles outright has become an option manufacturing businesses are struggling to afford. 

Figures released by HMRC reveal there has been a significant decline of company cars being offered as a Benefit-in-Kind. Companies are now turning to business car leasing companies to advise on the right vehicles and funding options for their business. 

Leasing a company car gives manufacturing executives access to a wide range of premium vehicles together with several financial benefits, from both a business perspective and personal costs. 

Tax Relief Benefits 

It doesn’t matter whether you use a car part-time or full-time, you still have to pay tax. Leasing a company car offers tax breaks that notably impact your bottom line. 

Tax relief on lease agreements enables VAT-registered companies to claim 50% back on monthly payment. If the vehicle is used purely for business purpose, you are entitled to 100% VAT rebate. 

If you lease a van for your business, you can claim the full 100% back under VAT reclamation rules for van rentals.

Corporation Tax benefits can also be offset against your company profits in relation to car leasing. Vehicles with CO2 emissions under 110 130g/km lower enable you to recover a further 8% per annum and further lower your annual tax bill.

Free Up Cash-Flow 

Car leasing agreements are attractive to manufacturers that have minimal profit margins. Unlike purchasing a company car outright, leasing does not involve any hefty upfront payments. 

Lease hire agreements are paid on a monthly basis. This allows account managers to organise balance sheets. You know exactly how much money is going out of your account each month which makes financial planning inherently easier. 

Furthermore, the upfront costs are minimal – usually the first three months rental fees. This means you avoid shelling out a huge amount of capital and can invest money in other areas of your business.

Once the contract hire expires, there are no further costs to pay unless you exceed the mileage limits agreed when you signed the contract. At the end of a lease agreement, the vehicle is returned to the car leasing company. You then have the option to replace it for a newer model.

Save Costs On AFVs

Alternative fuel vehicles (AFVs) are becoming increasingly popular with UK businesses. Hybrids, plug-in hybrids and electric-only cars have lower CO2 emissions and thus subject to a lower VED car tax band

The cost of Vehicle Excise Duty (VED) depends on the age of a vehicle, the size of the engine and the official rating of CO2 emissions. An additional charge of £320 is applicable to cars with a list price exceeding £40,000. 

AFV fuel costs can also be less expensive than petrol and diesel. Plans to introduce more charging points throughout the UK will mean AFVs are more accessible to drivers that cover long distances. 

Buying a car outright is potentially damaging to companies in the manufacturing sector. Business car leasing provides a cost-effective solution and gives you more flexibility without losing any of the benefits of having a fleet of vehicles available to your employees and executives. 


Brexit: Drivers to Bear the Brunt of Increased Manufacturing Costs

The uncertainty around Brexit is hitting businesses hard. And costs are destined to increase even more once Britain leaves the EU.

Some car manufacturers are moving their operations outside of the UK  and are already planning to pass increased production costs on to consumers purchasing vehicles in the UK.

In the current climate, the harmony of a single market enables car manufacturers to build vehicles “just in time”. This allows them to source parts from all over Europe without the expense of stockpiling parts.

With new regulations expected to be introduced in the UK post-Brexit, border delays will disrupt the tight constraints employed by carmakers based in Britain and subsequently increase production costs.

In addition, the Society of Motor Manufacturers and Traders (SMMT) estimate EU tariff on cars will cost the industry £5bn more on import and export costs.

Car manufacturers say the additional costs will be borne by consumers.


Brexit Will Increase Motoring Costs

In the event of a ‘no-Brexit’ deal, import tariffs on cars and spare parts will incur a 10% tariff under World Trade Organisation rules. It is estimated that EU tariffs will add at least £1,500 on to the cost of foreign vehicles sold in the UK.

Drivers in the UK will also bear the brunt of increased manufacturing costs given import tariffs will also be applied to parts.

Brexit has already heaped more than £2bn on to the energy sector which has seen a rise in utility bills. Oil prices will go the same way.

Drivers in Britain are already out of pocket following US sanctions on Iran. Fuel costs added another 11p a litre on to petrol price and 13p on diesel. The RAC has warned the average cost of a full tank of petrol will hit a record high of £70.

Although Prime Minister Teresa May pledged a duty freeze on petrol for the ninth consecutive year, the policy leaves a £9bn hole in the Chancellor’s budget?

How much longer will the government permit duty-free tariffs on petrol. Once the freeze on fuel duty is inevitably lifted.


What Will Brexit Mean For Mobile Businesses?

2019 has already been announced as the most expensive year to own a car. For mobile businesses, motoring costs will inevitably rise year on year.

The hike in Vehicle Excise Duty last year already added an average of £65 a year on road tax for new cars with CO2 emissions over 255g/km.

With such daunting increases for motorists, mobile businesses that rely on a fleet of vehicles could be forced to downsize and cut operations.

Whilst buying business vehicles outright puts a significant stress on business capital, leasing a fleet of cars releases cash flow that is vital for businesses to function efficiently.

Business car leasing provides a solution to some of the problems posed by Brexit.

With so many companies across multiple sectors already starting to feel the pinch of Brexit, managers need to prepare for the next two or three years now. Can your business really afford to buy a fleet of cars in a post-Brexit world?

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