Why second-hand cars can work for a business and how to choose the right options
If you own your own business, then as it begins to grow, you might discover that you need to invest in transportation. This likely means contemplating purchasing company cars. There are a number of things that you will need to consider, and each of the options does tend to come with its own benefits and drawbacks, which is something that you should bear in mind. Keep reading to learn more.
Is it wise to provide company cars?
Providing a company car to your employees needs to make sense for your business; otherwise, why would you bother? This means that you need to think about the costs of purchasing and running the vehicles against their usefulness, and it is also worth thinking about the tax implications too. Remember to consider the use of the car. Are your employees going to be using the vehicle privately – which includes commuting? If you plan to allow this, then you do get better tax benefits. The tax you will owe on the vehicle depends on the value of the car when it was new, whether you provide fuel and allow employees to use the vehicle for personal use. If the car is used solely for the business, then you can still claim back the VAT spent on fuel and the car too.
An overview of providing company vehicles
There are a number of pros and cons when it comes to providing company vehicles to your employees. Obviously, the business is the registered keeper of the car. If you choose to purchase the vehicle, then you will need to be mindful of its depreciating value, although most businesses use the cars until they simply can’t anymore, which means selling it on isn’t really something that you will need to think about. A second-hand vehicle has often already reached a plateau in terms of value too, so it isn’t likely to depreciate too much more during your ownership, especially if it is looked after. The cars also count as a business asset which can be utilised if necessary to generate more money. There are also the costs associated with running the vehicle, although there are tax benefits to consider here, too, which will offset some of the costs.
Purchasing the car
If you have decided that providing cars to employees is a worthwhile endeavour for your business, you next need to think about how you are going to purchase the vehicles. Arguably, the biggest consideration is whether to buy outright or lease. Your choice will obviously largely depend on your cash reserves. Leasing is a perfectly viable option, but remember that your business doesn’t own the vehicle and that it will eventually need to be returned, and it will need to be in a good condition. However, you can often cite the cost of leasing as a business expense, and it is, therefore, deductible.
On the other hand, if you can afford to, you could also choose to purchase the vehicles outright. This would then mean that they are fixed assets, and through capital allowances, you would qualify for tax relief. You can choose either a new vehicle or a second-hand vehicle. The process doesn’t change much depending on your choice, although obviously, a second-hand vehicle would be cheaper. The car will still need to be registered to the business and properly taxed.
It might also be worth thinking about the number plates of the vehicles; some businesses like to use personalised plates to act as a marketing tool, but this isn’t always possible on vehicles that are leased. If you think that personalised number plates are something that you would like to explore, then you should check out Regtransfers. This will be a great place to start to see what combinations are available.
Tax implications
Regardless of whether you choose to purchase or lease the cars for your business, there will still be tax benefits. The benefits that you can expect will depend on how much the cars were worth brand new, the CO2 emissions it produces, and, as mentioned above, whether or not the business plans to pay for private fuel costs. If your business does its own accounts, then this is something that you should consult the accounting team with because forms will need to be submitted.
Final verdict
Purchasing a company cars for the business is a big decision, and you have to think about whether or not it will make sense for your business. By and large, opting for second-hand vehicles does tend to make the most sense financially most of the time. Although, of course, there are a number of other things that you will need to bear in mind, predominantly the needs of the business. There are tax benefits to providing company cars, which tend to act as an incentive for the most part. However, the benefits will not offset the costs associated with purchasing and running a vehicle.