Blog: RALPH MORTON
Buy or lease? Good question.
I’ve been thinking about this for a while, especially since writing our most recent Special Report, Car leasing v car purchase.
Last week I was talking to a fleet industry consultant who said he was thinking of buying the new Jaguar XF.
Why not lease I asked?
“Being in the industry I get terms for the Jaguar, I have the cash, and I reckon that I can do as well as the leasing companies when it comes to selling the car again. So why should I let a car leasing company profit from my car?” came the reply.
Unfortunately, not all of us are that flush with either cash or such car industry expertise.
And I still believe that business car leasing provides SMEs and small business owners everywhere a great opportunity to drive a car at a price they could never afford to buy, because it’s a simple pay on use agreement.
Monthly lease payments are more affordable than purchasing a car.
And it really doesn’t matter whether you go for a business car lease, more commonly known as contract hire, or for a personal car lease if you don’t want to put the car through the business.
So to prove it to myself, I got Audi Direct to provide me some quotations for my latest car, an Audi A4 Avant 2.0 TDIe 163PS SE Avant – and very nice it is too.
Both quotations are over 36 months and 30,000 miles.
First, the purchase method under a PCP agreement
- Audi A4 Avant 2.0 TDIe 163PS SE Avant, £28,775 cash price
- Deposit £5700
- Amount of credit £23,075
- Finance charges £3584
- 35 monthly rentals of £435
- Final rental to purchase £11,531
Second, the contract hire method under a business car lease agreement
- Audi A4 Avant 2.0 TDIe 163PS SE Avant, £28,720 P11D price
- Initial rental £1000
- 35 monthly rentals of £333
Even allowing for the fact that only 50% of the VAT can be reclaimed on a business car lease rental – meaning there’s an extra £1176 to add in non-claimable VAT – the contract hire method allows a much lower financial entry point than car purchase.
Given that most small businesses need to keep as much cash as possible in their business at the moment to fund operations and business expansion, business car leasing has to be a business car finance option worth serious consideration.
