Business vehicles: benefits and costs
If you were looking for information relating to company car tax or driver management issues please see our related article Company cars: implications for your staff and your business
You may need vehicles to actually operate your business or, if you’ve got employees, you may be considering providing business vehicles which are available for private use as an employee benefit. Whatever the reason you’re purchasing and running business vehicles, make sure you understand what’s involved and what your obligations are.
Buying a business vehicle
If you have the funds available, or you are able and willing to take out a loan to finance the purchase, buying your own car(s) outright is one option to consider.
Advantages of buying your own business vehicles
- you legally own the vehicle
- you may deduct bank interest and capital allowances from taxable profits
Disadvantages of buying your own busines vehicles
- you are responsible for maintenance
- when you decide to sell the vehicle, its value may be less than you expected
Buying a vehicle via Hire Purchase
You usually pay an initial deposit (using business funds or a loan) and then pay for the vehicle via monthly payments over a set period of time. At the end of the period you pay the final option to purchase fee and the vehicle is yours.
Advantages of buying a vehicle via Hire Purchase
- you do not bear residual value risk, although you may include an option to take ownership at the end of the lease period for an amount that is fixed at the start of the agreement
- you may deduct bank interest and capital allowances from taxable profits
Disadvantages of buying a vehicle via Hire Purchase
- you do not legally own the vehicle until you take ownership at the end of the hire purchase period
- for cars, the VAT paid is generally not recoverable from HM Revenue & Customs
Leasing a business vehicle
Leasing a vehicle is like renting it over a period for set rental payments. At the end of the period you can either return the vehicle to the owner or opt to pay an option to purchase fee and the vehicle is then yours.
Advantages of leasing a business vehicle
- you do not bear residual value risk, although you may include an option to take ownership at the end of the lease period for an amount that is fixed at the start of the agreement
- you may deduct rental payments from taxable profits
- maintenance and road tax charges are often included in the monthly fee
Disadvantages of leasing a business vehicle
- you do not legally own the car
- you cannot deduct capital allowances from taxable profits
- there will usually be annual mileage limits and you will incur hefty penalties if you exceed them
Insurance for your business car or van
When looking at insurance cover for your vehicles don’t always go for the cheapest – look for well-known companies that provide good support in the event of a claim and have experience in providing insurance advice for business vehicles. Remember, if your business relies on its vehicles you could be severely impacted if anything happens to put them out of action.
Third party insurance is the minimum insurance cover you can get and is mandatory. It covers the drivers' liability for injury to others, including passengers, and for damage to other people's property resulting from use of a vehicle on a road or other public place.
Fire and theft cover is often added to third party cover and will give you added protection against theft or damage from fire.
Comprehensive insurance covers damage to your vehicle as well
Also consider damage and theft insurance for any goods being transported
Get a business van insurance quote from MORETH>N BUSINESS
Get a quote for business car insurance
Other operational overheads to consider
- routine servicing of vehicles and MOT certificates if required
- repairs for scratches, wear and tear or accidental damage – maintain a good business image by having your vehicles in good repair, especially if they have your company name or logo on them
- fuel (It’s worth considering alternative fuel systems for your cars as these could make a significant difference to the running cost of your cars).
- cleaning
- parking costs
- congestion and toll charges
- garaging or parking for vehicles stored at business premises
- additional security features - eg immobilisers - which may reduce your insurance premiums
3 ways to help keep your business motoring costs down
Installing additional time saving features such as satellite navigation systems to make sure your drivers don’t waste time fuel and money by taking a wrong turn, and your customers or suppliers are not left waiting around. TotalPDA sells a large range of new and refurbished satellite navigation systems including TomTom, Navman and Garmin.
If you need to be able to quickly locate your vehicles or drivers at any time, there are tracking/driver locating systems available to help you do just that. Take a look at this pay as you go phone locating and phone tracking service that allows registered users to locate a mobile phone handset and then display the position instantly on a web map of Great Britain & N.Ireland - with an accuracy of up to 50 metres.
Save time and money with a Fuel Card Account. Forget about keeping fuel receipts and filling out expenses. A Business Fuel Card Account helps you manage your fuel expenses and keep track of your fleet . Fuel Cards are accepted 24/7 at most service stations nationwide. Apply online and get BIG discounts!
Business vehicles: benefits and costs
If you were looking for information relating to company car tax or driver management issues please see our related article Company cars: implications for your staff and your business
You may need vehicles to actually operate your business or, if you’ve got employees, you may be considering providing business vehicles which are available for private use as an employee benefit. Whatever the reason you’re purchasing and running business vehicles, make sure you understand what’s involved and what your obligations are.
Buying a business vehicle
If you have the funds available, or you are able and willing to take out a loan to finance the purchase, buying your own car(s) outright is one option to consider.
Advantages of buying your own business vehicles
- you legally own the vehicle
- you may deduct bank interest and capital allowances from taxable profits
Disadvantages of buying your own busines vehicles
- you are responsible for maintenance
- when you decide to sell the vehicle, its value may be less than you expected
Buying a vehicle via Hire Purchase
You usually pay an initial deposit (using business funds or a loan) and then pay for the vehicle via monthly payments over a set period of time. At the end of the period you pay the final option to purchase fee and the vehicle is yours.
Advantages of buying a vehicle via Hire Purchase
- you do not bear residual value risk, although you may include an option to take ownership at the end of the lease period for an amount that is fixed at the start of the agreement
- you may deduct bank interest and capital allowances from taxable profits
Disadvantages of buying a vehicle via Hire Purchase
- you do not legally own the vehicle until you take ownership at the end of the hire purchase period
- for cars, the VAT paid is generally not recoverable from HM Revenue & Customs
Leasing a business vehicle
Leasing a vehicle is like renting it over a period for set rental payments. At the end of the period you can either return the vehicle to the owner or opt to pay an option to purchase fee and the vehicle is then yours.
Advantages of leasing a business vehicle
- you do not bear residual value risk, although you may include an option to take ownership at the end of the lease period for an amount that is fixed at the start of the agreement
- you may deduct rental payments from taxable profits
- maintenance and road tax charges are often included in the monthly fee
Disadvantages of leasing a business vehicle
- you do not legally own the car
- you cannot deduct capital allowances from taxable profits
- there will usually be annual mileage limits and you will incur hefty penalties if you exceed them
Insurance for your business car or van
When looking at insurance cover for your vehicles don’t always go for the cheapest – look for well-known companies that provide good support in the event of a claim and have experience in providing insurance advice for business vehicles. Remember, if your business relies on its vehicles you could be severely impacted if anything happens to put them out of action.
Third party insurance is the minimum insurance cover you can get and is mandatory. It covers the drivers' liability for injury to others, including passengers, and for damage to other people's property resulting from use of a vehicle on a road or other public place.
Fire and theft cover is often added to third party cover and will give you added protection against theft or damage from fire.
Comprehensive insurance covers damage to your vehicle as well
Also consider damage and theft insurance for any goods being transported
Get a business van insurance quote from MORETH>N BUSINESS
Get a quote for business car insurance
Other operational overheads to consider
- routine servicing of vehicles and MOT certificates if required
- repairs for scratches, wear and tear or accidental damage – maintain a good business image by having your vehicles in good repair, especially if they have your company name or logo on them
- fuel (It’s worth considering alternative fuel systems for your cars as these could make a significant difference to the running cost of your cars).
- cleaning
- parking costs
- congestion and toll charges
- garaging or parking for vehicles stored at business premises
- additional security features - eg immobilisers - which may reduce your insurance premiums
3 ways to help keep your business motoring costs down
Installing additional time saving features such as satellite navigation systems to make sure your drivers don’t waste time fuel and money by taking a wrong turn, and your customers or suppliers are not left waiting around. TotalPDA sells a large range of new and refurbished satellite navigation systems including TomTom, Navman and Garmin.
If you need to be able to quickly locate your vehicles or drivers at any time, there are tracking/driver locating systems available to help you do just that. Take a look at this pay as you go phone locating and phone tracking service that allows registered users to locate a mobile phone handset and then display the position instantly on a web map of Great Britain & N.Ireland - with an accuracy of up to 50 metres.
Save time and money with a Fuel Card Account. Forget about keeping fuel receipts and filling out expenses. A Business Fuel Card Account helps you manage your fuel expenses and keep track of your fleet . Fuel Cards are accepted 24/7 at most service stations nationwide. Apply online and get BIG discounts!