Please see below a matrix offering a snapshot of the advantages and disadvantages of the most popular forms of acquiring vehicles.

Financial

Fully predictable cash flows in advance
Does not increase company gearing
Customer avoids negotiating maintenance
Customer avoids risk on disposal
Liability off balance sheet		U/N

Customer can choose to extend term			N/A
Customer avoids sourcing vehicle
Customer avoids the sourcing of funding
Customer avoids arranging maintenance
Customer avoids arranging disposal
Customer can own asset

VAT on vehicle purchase redeemable
Customer reclaims VAT on finance element of rental		N/A	N/A	N/A
Customer reclaims VAT on services element of rental			N/A	N/A

Customer claims Capital Allowances (CA)
Customer allowed depreciation instead of CA
Interest cost allowable as tax deduction
Service element of rental allowable as tax deduction			N/A	N/A

N/A = Not Applicable

U/N = Usually Not

1. If on a full maintenance contract. Otherwise maintenance is arranged & paid for as the need arises.

2. This benefit passes directly to the customer through cheaper rentals.

3. 50% of VAT reclaimable if private use of the vehicle. If no private use then 100% of VAT reclaimable. Finance element includes depreciation, interest, Road Fund License, collection, overhead & profit.

4. For cars purchased after 6 April 2009 the annual allowances are dependent on the CO2 emissions of the car:

• For cars with CO2 emissions up to 110 g/km a 100% allowance is available
• For cars with CO2 emissions between 110 and 160 g/km the annual allowance is 20%
• For cars with CO2 emissions over 160 g/km the annual allowance is 10%, calculated in a    special pool.

5. The Chancellors Budget statement in March 2008 announced a reform of leasing rental disallowances.

The previous “half excess” rule, which restricted the amount of rental allowable against taxable income for leased cars costing over £12,000, was replaced by a Co2 based system from April 2009.

• Cars with Co2 of 161g/km or more attract a 15% disallowance on the finance element of a lease rental.
• Cars with Co2 of 160g/km or less attract NO rental disallowance.

These changes in the rules for leasing disallowances generally have the net effect of reducing overall contract hire costs, particularly on sub 160g/km cars. This is vehicle specific none the less so please make contact with us for specific examples of how these new rules work in practice.

6. In accordance with current accountancy practice. This is likely to change in the future.