You Won’t Believe The True Cost of Buying A Company Car
It is better to buy or lease a car for your company?
Deciding whether to buy or lease a company car is a dilemma countless business owners have faced over the years. And it was a more difficult decision to make back in the day than it is now. The cost of owning a car in 2019 is the decision maker for most companies these days. Take a look at some eye-watering figures.
* The following costs are estimated averages. Figures differ depending on the type of vehicle, age of driver, number of miles etc.
Average fuel prices in the UK are £1.21/l. Calculate you annual running costs on company cars and it will probably ring in at over £1000
Tax on CO2 emissions will cost between £1,428-2,856 a year RAC estimate maintenance costs are £472 a year
The average car insurance is £436 a year
And that’s all on top of the cost of the vehicle. Also bear in mind that cars lose £1000 in value as soon as you drive it off the forecourt. Ouch. And these figure are the averages for 2017. With Brexit on the horizon, the cost of buying and leasing a car has risen by 9%.
The Brexit Effect
Car manufacturers hold the distinction of being the only sector to have survived and thrived the dismantling of Britain’s industrial labour force. However, the automotive industry is due to take another hit if car prices surge following Brexit. Manufacturers have warned a weakened pound sterling and strengthened sales in the European market could push car prices up as much as £1500.
Car sales are already down by 15.7% in the last year. Basically, the cost of buying and running a car is too expensive. So imagine the cost of owning a fleet of cars!
Pros of buying company cars
- Owning a car for your business is an asset that can be sold – albeit not for a profit.
- No additional charges for mileage or damage to car – other than fuel and repair costs
- 100% of your fixed costs can be claimed as corporation tax in the first year, providing CO2 emissions are lower than 110g/km of carbon
- You can deduct loan deal or cost of buying a car from business tax
Cons of buying a company car
- Cars depreciate in value
- You need a significant amount of capital to buy a fleet of cars
- Owners are responsible for maintenance costs
- Time spent organizing maintenance, buying and selling your fleet of cars can be better spent doing something else
More UK businesses leasing a fleet of cars
Figures released by the British Vehicle Rental and Leasing Association indicate more UK businesses are opting to lease fleet cars rather than buying them outright. Car and van hire grew by 3.6% and 16.2% respectively. Furthermore, the survey found that fleet cars emit 7% less CO2 emissions than the average new car registered in showrooms. That means you pay less tax. And contract hire agreements are more attractive for a number of other reasons too.
Pros of leasing a fleet of cars
- Leasing a fleet of cars is significantly less expensive than buying your own car fleet
- Contract hire companies can be flexible and allow businesses to add or remove cars from your fleet in a single phone call as and when you need to
- Maintenance costs are covered in the contract so you can easily manage the cost of your car fleet each month
- Contract hire fleet cars are tax deductible. The full 100% can be claimed against the finance element in VAT and mileage for cars that are used solely for business use
Cons of Leasing a Car Fleet
- Leasing a fleet of cars means you don’t own the vehicles so they cannot be classed as business assets or sold to a third-party
- You have to remain within the boundaries of an agreed mileage limit. If the limits are exceeded you will incur more costs – though they are 100% tax deductible
- Businesses are responsible for ensuring the vehicle is returned in good working condition – additional fees are adding for poor maintenance and damage
When you lease a fleet of cars, you do not pay for the value of the car, you only pay for the use. When you buy a car, you essentially purchase an asset that depreciates in value from day one.
The cost of a lease agreement is always more cost-effective that a finance agreement. Not only that, hiring a fleet of cars with Toomey Leasing makes it is easier to manage payments and keep your accounts balanced!