IF you are not leasing your vehicles, you may well be compounding the financial pressures resulting from today’s tough economic climate. To keep smiling, use contract hire reckons Lombard boss Alex Baldock.
LEASING really comes into its own during difficult economic circumstances, especially where vehicles are concerned.
Business car leasing frees up capital at a time when the cost of funds is increasing. It also removes heavily depreciating assets from the balance sheet of your business – especially now when the residual values of cars are in sharp decline.
A leasing company takes that growing and unpredictable risk on your behalf, along with increases in peripherals like VED road tax. By fixing the majority of costs, business car leasing provides valuable certainty at a time of increasing unknowns.
From next April the case for leasing will become even stronger. In place of the Expensive Car Leasing Disallowance reducing the tax deductibility for lease rentals on cars costing over £12,000, there will be a flat-rate disallowance of 15% applied to vehicles emitting more than 160g/km of CO2.
So cars would typically have been better suited to a purchase product will now be more cost-effective on contract hire.
The financial case for business car leasing is compelling – it’s also worth noting that, in the current financial market conditions, bank-owned leasing companies have an advantage: banks get the cheapest funding available. Access to customer deposits means we only have to borrow the difference between loan amounts and the deposits, whereas non bank-owned leasing companies have to borrow the gross amount.
However, although many businesses lease vehicles, a substantial number either do not lease all the vehicles they might, or even still purchase outright. In addition, many have large numbers of drivers on a cash-for-car option, which is increasingly becoming more costly than providing an efficient fleet car on a lease.
Business vehicles account for a high proportion of business overheads. Those small businesses that still purchase their cars are making life unnecessarily difficult for themselves in worsening economic conditions. Lombard is very much open for business and committed to finding ways of releasing cash. And business car leasing is a key means of achieving this.
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