Now there’s a question that gets asked a lot.
And like most things in accounting… it really depends.
Here’s a breakdown of the differences between the two:-
Buying (Outright or on HP/Loan)
✓ You own the vehicle
✓ You can claim capital allowances (possibly 100% if it’s electric)
✓ No mileage or wear/tear restrictions
✘ Higher upfront cost
✘ The effects of depreciation
Generally, this is good for owners with cash reserves, doing low mileage, or planning to keep the vehicle long term.
Leasing (or Finance Lease)
✓ Lower monthly payments
✓ Maintenance often included
✓ Easy to upgrade every few years
✘ You never own the vehicle
✘ Potential mileage limits or penalties
This method is good for businesses wanting predictable costs, no hassle, and newer vehicles regularly.
But Don’t Forget These Extra Factors – They Can Change Everything!
1. Business vs Personal Use
If you use the car personally, HMRC will treat it as a benefit in kind, triggering extra tax.
So sometimes it’s better to have the vehicle privately and claim business mileage instead.
2. Is It Electric or Low-Emission?
There remain some decent tax perks at the moment:-
✓ 100% first-year allowances (when buying)
✓ Ultra low benefit in kind tax if it’s a company car but used personally
✓ Lower running costs
Tax rules favour electric vehicles, which might sway your decision.
3. Cash Flow vs Long-Term Cost
Leasing helps with short term affordability.
Buying often saves more longer term, especially if you can claim allowances.
It all comes down to how your cash flow looks right now.
Final Thoughts
1. There’s no one size fits all answer – but getting it wrong could cost you thousands in tax or lost value.
2. And don’t forget oil baron Paul Getty’s saying, “If it appreciates, buy it. If it depreciates, lease it”
More than happy to chat this through with anyone in this position.
#CompanyCars#LeaseOrBuy#UKBusiness#TaxTips#SmallBusinessAdvice#ElectricVehicles#AccountingThatAddsValue #DirectorAdvice