Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Company cars

Five ways to fund a company car

by Personnel Today 18 Feb 2010
by Personnel Today 18 Feb 2010

Buy outright? Lease purchase? Contract hire? Find out which company car funding method best suits your business.

Fleet funding is a complex area, with potentially serious and expensive consequences for the wrong decision. Each method has its advantages and disadvantages, depending on the nature and needs of your organisation. In the first instance, a company that is cash-rich may choose to buy a car or fleet of cars outright.

1. Outright purchase

The benefits here are that the car is the property of the company from the outset, and so has complete control over its use. However, the company then takes on complete responsibility for the service and maintenance of the car, presenting a regular draw on finances. There are also tax implications for this type of funding: tax deductible capital allowances are permissible only up to a total of 25% of the value of the vehicle, or £3,000, depending on which is higher.

2. Hire or lease purchase

For those who want to own the vehicles but don’t want to pay outright there are hire purchase schemes. Under these arrangements the car remains the property of the leasing company until final payment has been made by the employer. Again, the company takes on responsibility for maintenance and service, but this option can ease cashflow and finance concerns as a payment of around 15% will be needed up front, rather than the full 100% required for outright purchase. Finance payments can be offset against tax.

3. Finance lease

This is similar to hire purchase, with a 15% payment being required at the outset, but the employer never gets to own the vehicle, so it’s basically a very long rental agreement. As this is essentially a service, not a purchase, the monthly rental payments attract tax. However, half of the VAT on rental payments, and all of the VAT on maintenance, can be reclaimed.

4. Contract hire

Becoming more popular, the contract hire industry is highly developed in the UK; around 40% of all fleets are funded this way. Under these arrangements, the funding company retains ownership of the vehicle for the lifetime of the hire, but it will also take responsibility for maintenance and servicing. Only 6-7% of the purchase price is required up front, and the tax treatment is the same as for finance leasing.

5. Contract purchase

This is where the funding company retains ownership of the car until final payment has been made; if a lump sum payment is made by the employer at the end of the contract, ownership of the car will pass to them. Aside from this, the tax implications are the same as for contract hire, although it is not possible to reclaim VAT on regular contract payments.


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

mktoMunchkin(“589-ITG-580”);

Personnel Today
Personnel Today

Personnel Today articles are written by an expert team of award-winning journalists who have been covering HR and L&D for many years. Some of our content is attributed to "Personnel Today" for a number of reasons, including: when numerous authors are associated with writing or editing a piece; or when the author is unknown (particularly for older articles).

previous post
Employing ex-soldiers in the workplace
next post
Banking HR professionals don’t have the clout to influence pay or reward for high earners

You may also like

How salary sacrifice electric cars can help staff...

20 Oct 2022

‘Ministers must increase employee mileage rates’ as costs...

23 Jun 2022

Commuting by car fast becoming unaffordable

11 Mar 2022

Hybrid working: the tax implications to consider

11 Feb 2022

Law firm Stephenson Harwood offers electric cars to...

1 Nov 2021

HR warned over employees’ use of private cars...

27 Jul 2021

Government publishes guide on safety for businesses due...

24 Jun 2020

Company car drivers offered tax relief during coronavirus...

3 Apr 2020

Company car schemes on the rise as salary...

13 Sep 2012

Is employee car ownership dead or resting?

17 Aug 2011

  • The HR Bundle: Your one-stop guide to building a successful global HR Department PROMOTED | Get your hands on Deel’s free HR bundle...Read more
  • The Benefits of an Employee Assistance Programme PROMOTED | EAPs support employees in a range of ways...Read more
  • Intergenerational working and how to manage up and down the generations PROMOTED | The benefits and challenges of intergenerational workplaces...Read more
  • Bereavement in the workplace: How training can help HR get it right PROMOTED | HR professionals play an essential role...Read more
  • UK workforce mental wellbeing needs PROMOTED | The mental wellbeing support employers are providing misses the mark...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2023

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2023 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+