Buying a new car for personal use is a big financial commitment and can be a difficult decision to make. However, when a car is to be used for business purposes, there are a number of additional factors to consider, including tax benefits, maintenance and any up-front costs.
Before you buy or lease your new car, make sure to consider the following:
For What Purpose Will the Car be Used?
This is a factor that should never be overlooked as it can have a huge impact on your finances. If you buy a car is to be used for business only, you can claim the VAT back. However, if the car is also to be used for personal purposes, or for your daily commute to work, you cannot reclaim VAT.
This is where lease has its advantages. If used exclusively for business, your company can reclaim payments for lease, as well as 50% of VAT.
How Much CO2 Does the Vehicle Produce?
While it may be cheaper to opt for an older, second-hand car, it may not offer the same tax benefits, as CO2 emissions impact on what your company can claim as an expense.
Simply, the higher the CO2 emissions, the lower the amount that can be reclaimed for both purchased and leased cars. For this reason, whether you choose to rent or buy it is best to choose a newer model, or else opt for an eco friendly electric car.
Can You Afford Maintenance Costs?
When you purchase a car, while a warranty may cover major faults, you may still have to pay for new tyres, MOTs and servicing. These are costs that can soon mount.
However, if you choose to lease a car from the likes of Car4Leasing, your monthly or annual repayment typically includes regular maintenance, meaning you are unlikely to face any surprising and unexpected costs.
So, What Option Should You Choose?
Leasing can offer a number of benefits, such as tax-deductable payments, no maintenance costs and no hassle of selling the vehicle – simply hand the car back at the end of the agreement. However, purchasing also has its advantages, particularly if you will be covering more miles (many lease options have a limited mileage policy), and the ability to customise your car.
The best option for you depends upon your circumstances and what the car will be used for. Remember, whether you decide to buy or lease, always read any financial agreements carefully.