Happy birthday new car accounting rules
IT’S NOW been a little over a year since new taxation rules were introduced affecting the acquisition method of company cars. In particular, explains car finance writer Brian Rogerson, contract hire became a much more attractive proposition. Here’s why.
IT’S BEEN a year now since the rules on car leasing were simplified. More to the point, the balance between whether it was better to buy your business car or to lease it swung in favour of the latter. Out went the complicated half the excess rule to be replaced by a simplified leasing disallowance formula based on CO2 emissions.
Little wonder, then, that company cars for small businesses are back in the news. Several motor leasing companies and manufacturers have recently expressed an interest in doing business in the small business sector in the wake of the recession.
For example, LeasePlan’s specialist small-business subsidiary, FleetLine, is pursuing hard its contract hire product for fleets from “one to 100 vehicles”.
At the same time, BMW, Kia, Renault and most recently Mazda have all inaugurated business strategies designed to improve their share of the crucial small-business company car market. Renault’s plan includes an agreed partnership with leasing company Arval to allow its UK network of dealers to quote improved contract hire rates to small fleets of company cars.
So the spotlight is once again on small businesses and their company cars. And as liquidity returns to the finance markets so contract hire becomes a more winning proposition for small businesses. Contract hire, indeed, has seemed far more attractive since the extreme volatility of the used car market in recent months has made the residual value of cash-bought company cars a risky exercise.
Similarly, tax changes that have influenced company cars in recent months have served to make car leasing a prospect much more viable than previously.