Media post: Why More UK Businesses are Leasing Rather than Buying Company Cars 

Over the years, changes in public policy, economic fluctuations, and business trends have significantly impacted the ways companies operate. Many businesses have been experimenting with leasing or subscription models across many aspects of their businesses to streamline costs and maintain healthy cash flow. While in previous years the switch to leasing and subscription models was generally confined to software and tech, many companies are now turning to leasing to acquire company vehicles without major upfront costs. Let’s take a closer look at this growing phenomenon:

Exploring the Advantages of Leasing

When it comes time to make key decisions about company vehicle provision, more businesses are choosing to lease a company car rather than to buy outright. This isn’t just popular with SMEs looking to optimise their operational costs and scale without major upfront investment – larger, more established corporations are increasingly turning to leasing models for their fleets. This shift is driven by an array of strategic benefits, which we’ll now go into. 

Predictable Expenses and Budgeting

One of the primary reasons companies lease is the predictability it brings to their financial management. With leasing, businesses pay a fixed monthly fee throughout the lease term, which assists with budgeting and facilitates cash flow management. There are no concerns about unexpected maintenance costs or sudden drops in the vehicle’s value. 

Access to Modern, Efficient Cars

Leasing also ensures staff have continuous access to the latest, most fuel-efficient vehicles. Not only could this save the company money on fuel, but it would also reduce the firm’s carbon footprint, which is becoming increasingly important due to growing public and regulatory scrutiny of corporate environmental behaviour. 

Reduced Administrative Burden

Choosing to lease rather than buy company cars can also significantly reduce the administrative load placed on companies. Many leasing contracts include comprehensive maintenance packages, so businesses don’t need to worry about arranging and paying for their fleet’s service and maintenance. 

Tax Implications of Leasing

The tax implications of leasing versus buying have a significant bearing on a company’s decision. In the United Kingdom, when a business leases a car, lease payments can be offset against corporation tax, and up to 50% of the VAT charged on rentals can be reclaimed. These tax efficiencies are certainly attractive to UK businesses and contribute to the growing trend.

Impact of the Change to Electric Vehicles

The global push towards greener alternatives is also playing a part in this shift. The UK Government has announced that from 2030, the sale of new petrol and diesel cars will be banned, further encouraging the shift towards electric vehicles (EVs). 

As EV technology continues to develop and the cost of outright purchase is often higher than that of other cars, businesses are seeing leasing as a more practical option to stay ahead of these changes. Leasing enables businesses to embrace the green revolution without the substantial upfront cost associated with EVs and the uncertainty over future depreciation values.

Flexibility to Change

Leasing provides companies with flexibility. Business needs evolve over time, and so do individual employees’ requirements. With a lease, companies can choose different vehicles to meet changing business needs without the challenge of selling off older cars.

Conclusion

In an ever-changing business landscape, businesses need to operate as efficiently as possible. The movement towards leasing company cars is a clear illustration of that need. Leasing provides businesses with cost predictability, reduced administrative burdens, and the flexibility to adapt to future changes, such as the shift to electric vehicles. As such, the trend of UK companies leasing rather than buying is set to continue. It is easy to see why, with all the benefits it offers, this method of transportation is becoming the go-to for companies both large and small.