Small businesses continue to purchase their company cars.

In fact, at least 45% pay cash for their cars in this way.

However, the attraction of low interest rates, and the increasing raft of health and safety legislation, are making smaller fleet owners think twice about this approach.

Contract hire, sometimes called operating leasing, is currently experiencing a resurgence in popularity.

This is due to the increasing hassles that running a small fleet involves.

For a start leasing is cost-effective.

The leasing company is able to reclaim VAT on the cost of the car and take that into account when quoting monthly leasing rates.

The current growth in lease company services means that duty of care issues are taken away from the small business.

These include driver training and licence checking – as well as servicing and re-selling. This leaves the company to get on with making a success of their core business.

In addition, not having depreciating assets such as cars on the balance sheet is a win for most companies’ business ratios.

Much of the continued obsession with outright purchase is a legacy of the peculiar British desire to own their assets – whether cars, televisions sets or houses.

Surely having possession and use of the asset as it adds value to the day-to-day working of a company is the most important factor?

Small businesses should be encouraged to take advantage of the competitive nature of the car leasing industry at the present moment -and do their cash flow a favour!

Further information

• Brian Rogerson writes for Motor Finance. Visit the magazine here: www.motorfinanceonline.com.

• If you would like to know more about contract hire for business cars, read the Business Car Manager Advice Centre article here: www.businesscarmanager.co.uk.