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258 – How a PCP can help your business

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Alison arrives home with her new Fiat 500

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24 July 2009

Kim Faircloth
Kim Faircloth: brilliantly helpful sales and service and Fiat Parkside

I WASN’T surprised when I saw Robert Nugent’s intelligent piece on the rise of personal lease deals – see his special report The attraction of personal lease deals.

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.

Fiat 500s at Parkside Garage
Parkside showroom: colourful Fiat 500 display

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.

Alison Morton with her Fiat 500
Alison arrives home with her new Fiat 500

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.

 

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Ralph Morton

Ralph Morton

Ralph Morton is an award-winning journalist and the founder of Business Car Manager (now renamed Business Motoring). Ralph writes extensively about the car and van leasing industry as well as wider fleet and company car issues. A former editor of What Car?, Ralph is a vastly experienced writer and editor and has been writing about the automotive sector for over 35 years.

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