For too long I think they have been overlooked as a method of funding cars.
Instead of running your car through the business, a personal lease is just what it says – personal. Any business mileage you reclaim at 40p per mile using the tax-free AMAP (Approved Mileage Allowance Payment) system.
True, it’s not VAT-efficient. But it is easy to administer.
A couple of months back the Finance & Leasing Association (FLA) reported that PCP – a personal contract purchase – was the most popular way to fund a car from a dealer.
I think we helped. Recently my wife and co-director, Alison, took delivery of a Fiat 500 1.2 Lounge. The deal was terrific from Fiat (I did ask some of my leasing broker contacts to quote, but Fiat’s deal really was top drawer) – and means we pay less than £140 a month. For a top notch, high image car. That’s my sort of business motoring.
It will be useful for Alison who is starting a new business as an interior design and decoration consultant. It’s the right sort of image car – retro-smart but good value.
The process was made easier by the affable staff at the Fiat dealer we went to: Parkside in Whitton. They were everything you would want a dealer to be. Friendly; welcoming; on the ball; fuss-free; and helpful. If you want a Fiat in west London, then head straight for here is my tip. You won’t be disappointed.
So what is the advantage of Personal Contract Purchase (PCP)? Well, you get a low deposit and low monthly payments. At the end of the lease term you have the option to purchase the car at a pre-agreed value (often called a balloon payment); or to return it once all outstanding charges have been settled with any excess above the pre-agreed value as a deposit on the next car.
For those small business owners unsure of whether they should lease or buy, a PCP is a useful option. You can delay the decision to later – and then assess the options.
Personal contract hire (PCH) is different.
You agree a fixed monthly payment over an agreed period to which you can add a service and maintenance element. You pay the agreed rental each month and at the end of the agreement, you hand the car back – there is nothing else to pay and the contract is terminated.
In essence, it’s a contract hire agreement with the VAT added on top.
PCP or PCH – both are useful ways to run a smart business car for a low monthly outlay.
And without any of the hassles of accounting for it in your company’s books. Or paying company car tax. It’s worth a look I reckon.