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.