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Advantages
- Fixed repayment each month
- Title to the vehicle when all installments have been paid
- Capital allowance of 25% on the cost or WDV (subject to £3,000 max on non-commercial vehicles)
- Loan interest is fully allowable for corporation tax purposes
Disadvantages
- High initial deposit - usually 20%
- The vehicle has to be maintained, e.g. servicing, repairs etc. (usually at unknown cost)
- The vehicle has to be disposed of
Other information
- The vehicle is shown as an asset on the balance sheet
- Depreciation is charged to the profit and loss account
- Running costs are charged to the profit and loss account
- Budgeting is more difficult as costs are not fixed
Advantages
- Fixed repayment each month
- Initial deposit can be small
- Title to the vehicle when all installments have been paid
- Capital allowance of 25% on the cost or WDV (subject to £3,000 max on non-commercial vehicles)
- Loan interest is fully allowable for corporation tax purposes
- A terminal payment (balloon) can be incorporated
Disadvantages
- The vehicle has to be maintained, e.g. servicing, repairs etc. (usually at unknown cost)
- The vehicle has to be disposed of
Other Information
- A balloon has the effect of reducing the monthly payment and the vehicle can ultimately be sold, hopefully for more than the balloon value. Alternatively the balloon can be paid and the vehicle retained.
- The vehicle is shown as an asset on the balance sheet
- Depreciation is charged to the profit and loss account
- Running costs are charged to the profit and loss account
- Budgeting is more difficult as costs are not fixed
- Corporation tax is charged on any profit made on the disposal of the vehicle (or recovered on any loss)
Advantages
- Fixed repayment each month
- Initial deposit can be small
- The rentals are allowable for corporation tax purposes (see note below)
- A secondary (peppercorn) finance period can be made available
- The leasing company can recover VAT on the capital cost, thus reducing the monthly payments
Disadvantages
- The vehicle is being hired not bought
- The vehicle has to be maintained, e.g. servicing, repairs etc. (usually at unknown cost)
- The vehicle has to be disposed of
Other Information
- A balloon has the effect of reducing the monthly payment and the vehicle can ultimately be sold, hopefully for more than the balloon value. Alternatively the balloon can be paid and the vehicle retained.
- The vehicle is shown as an asset on the balance sheet
- On disposal the sale proceeds are returned as a rebate of rentals (less an administration fee)
- Rental allowances for non-commercial vehicles are reduced as the capital cost increases on vehicles costing more than £12,000
- Running costs are charged to the profit and loss account
- Budgeting is more difficult as costs are not fixed
- VAT is payable on the rental payments but partially reclaimable by VAT registered businesses
Advantages
- Fixed rental each month
- Rental payments normally include all the usual costs of motoring so there should be no additional costs other than insurance and fuel
- Initial rental can be small
- The rentals are allowable for corporation tax purposes (see note below)
- Relief vehicles can be included so ensuring constant mobility
- No purchase or disposal problems
- The leasing company can recover VAT on the capital cost, thus reducing the monthly payments
Disadvantages
- The vehicle is being hired not bought
Other Information
- The vehicle does not appear as an asset on the balance sheet as it is merely being hired and there is no material benefit from the sale proceeds
- Rental allowances for non-commercial vehicles are reduced as the capital cost increases on vehicles costing more than £12,000
- VAT is payable on the rental payments but partially reclaimable by VAT registered businesses
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