As a small business owner, you will need to buy a car for your business at some point. There are many choices available to you and each choice has its advantages and disadvantages. This guide will give you a quick summary of all these choices and why one choice may be better for you depending on your circumstances.
Business Car leasing
Business car leasing offers a small business owner many advantages and some disadvantages. But overall, it is an extremely favourable method to buy a car for your small business.
Advantages of Business Car leasing
Car leasing agreements cover the total amount of the car factoring in the depreciation of the car over the period of leasing. The factors that are considered are period of lease, miles that will be covered and the type of car bought. Note that the longer the period of the lease, the lower the monthly amount that will need to be paid. Normally car leasing agreements last between 24-48 months.
Disadvantages of Business Car Leasing
On average, you will not use all the mileage agreed upon in your car leasing agreement. But if you do exceed your mileage level you will pay an excess mileage fee. Note that the more miles you use, the more your car will depreciate. But the depreciation of your car will never be more than the value of the car itself. If as a small business you do not have enough money for a deposit, then you will end up paying a larger amount monthly which may put your cash flow at a disadvantage.
Business Contract Hire
Business Contract Hire allows you to buy a car for a certain period and then give it back. This will ensure that you make affordable monthly payments but you will never own the car. Monthly payments are worked out over a period of time after a deposit has been given. Other factors considered in working out the monthly payments that you will pay are: miles that will be covered, period of lease, deposit amount and credit scores.
Business Contract Purchase
The best benefit about a Business Contract Purchase is that you can hand your car back or pay a balloon payment and claim ownership of your car.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.