Businesses are always searching for new ways to reduce their costs, and never have they done it so much as in the current economic climate. One of the bigger expenses is in the purchase and maintenance of vehicles, and it’s for this reason that many companies are turning to company car lease hire.
Leasing the vehicles used by the company and its employees makes a lot of economic sense. It protects the capital that the business has built up, or removes the need for a large loan, because there is no need to spend large amounts on purchasing the required amount of company vehicles – instead, a monthly fee for each vehicle is paid, bringing down the initial cost very significantly. The monthly fee can vary for any given vehicle, depending on what options are chosen. At the most basic level, the fee will increase as the expected mileage of the vehicle increases. In addition to that, hirers can choose whether the fee covers extras such as tax, servicing and maintenance, breakdown cover and so on.
The companies are also able to choose the right kind of vehicles for their work, mixing and matching as they require in order to fulfil different roles for different employees. While in the early days companies may have found themselves with a very limited list of cars from which to choose, nowadays they have a huge variety of manufacturers and cars to choose from, and even then the specifications on the same model can be tailored according to need.
For employers with a large fleet of cars (usually 300 or more) there is another option available. ECO schemes (or Employee Car Ownership to give them their full name) can make provide even more savings. HMRC say that the average saving to a business is about £900 each year, for each vehicle, so it’s a tidy sum. It works because the vehicles are treated as privately owned rather than as a business asset, and employees pay a monthly contribution towards the cost of the vehicle. As they contribute to the cost, employees aren’t taxed under ‘benefit in kind’ rules, so it’s a further saving for them, while the company doesn’t use up its own capital in purchasing a large fleet – it just pays a portion of the lease agreement which is effectively in the employees name. Further information can be found on the HMRC website here.
The ECO schemes won’t suit everybody though. As mentioned above, they need a large fleet to make it worthwhile, and they are mainly used by companies who have a low level of staff turnover, for obvious reasons. It also needs to be a company who is able to manage their fleet efficiently, and this is because the rules require the regular collection of business mileage and expenses data, to ensure the scheme is being followed properly. For businesses whose employees don’t hang around for at least two years (the minimum length of time an employee can be in the scheme) or who can’t manage the associated paperwork efficiently, a standard company car lease hire scheme is probably more to their benefit.