Connect with us

Motoring

Benefits Of Car Purchasing From Company

Company benefits

A practical guide to the forms and advantages of company cars.

Company cars are among the benefits in kind granted to employees. However, they also have many advantages for companies, particularly in terms of taxation. It is important to choose your company vehicle(s) carefully because the CO2 emission rate and the type of fuel used can influence taxes. Moreover, more and more companies are converting to electricity. Long-term car rental solutions can also provide financial benefits for businesses.

Why acquire a leased company car?

Car leasing is a car financing system suitable for both individuals and professionals. It comes in three different formulas: LOA, LLD and leasing. Let’s see how this device works.

Table of Contents

What is car leasing?

In the automotive sector, leasing is a financial product based on the rental of new or used cars for a specific period. Unlike conventional consumer credit, it is therefore not used to buy a vehicle. The beneficiary pays only a fraction of the value of the car chosen and used. This value is calculated according to the configuration of the car, the duration of the contract and the number of kilometres travelled. Other criteria such as warranty extension, maintenance and assistance are also taken into account in setting this value.

The different leasing formulas

Everyone has the possibility of financing their car with a leasing solution. In general, individuals opt for an LOA or an LLD. Professionals also have the right to choose these two options, but leasing is the leasing system most recommended to them. If you are interested in company car leasing in Luxembourg, for example, car dealerships offer offers that are perfectly suited to companies. Through interventions grouped together in one place, these services make their job easier while allowing them to save time and money.

LOA

The LOA or rental with the option to purchase is the formula most popular with individuals. Professionals can also opt for this solution if they wish. The principle is simple: you choose the car you like and you specify the duration of the desired contract. The number of kilometres you plan to travel should also be included. The choice of car is based on your own criteria: finish, model, engine, etc. The duration can range from 24 to 60 months, while the number of kilometres can range from 10,000 to 120,000 km. If you wish, you can also set the amount of your contribution.

The amount of the monthly rent will be calculated on these criteria defined by the customer. The same applies to the residual value of the car at the end of the leasing contract. Residual value means the amount to be paid if you decide to keep the car at the end of the LOA. This is an option, but you can also return the vehicle to the lessor. You also have the possibility of renewing the contract with a new car, according to your wishes. In addition, the calculation of the amount of the rent also takes into account guarantees and possible maintenance costs. Either way, this amount remains the same throughout the duration of the contract.

LLD

The LLD or long-term rental is similar to the LOA. The criteria for setting the amount of rent are the same. It is also possible to add an extended warranty. However, this is a rental only. Thus, the car must be returned at the end of the contract.

Leasing

Leasing is the professional version of LOA. Companies and professionals often opt for this leasing solution to finance their car fleet. The amount of the rent is calculated according to the duration of the commitment and the optional guarantees (third-party insurance, financial loss insurance, etc.).

The contribution can also influence this tariff, but it always remains optional. At the end of the contract, the lessee can pay the residual value if he wishes to become the owner of the car. His second choice is to return the property to the lessor.

company car officer (1)

Security deposit and rent payment

The security deposit is the contribution paid by the tenant in order to rent a vehicle with an option to buy. It corresponds to 30% of the price of the car. In addition, the rent is to be paid monthly or quarterly.

The benefits of car leasing

Whether you opt for leasing, an LOA or an LLD, you are sure to enjoy many advantages. Individuals, companies and professionals, you have the chance to:

rationalize your investment by financing the use of the car and not its ownership,
save money if you include maintenance options,
benefit from personalized financing (with or without contribution),
renew the car with new models without worrying about resale.
It is true that the amount of rent can sometimes be substantial if you include maintenance costs and guarantees. However, opting for car leasing is more economical than a simple conventional loan, because these maintenance costs are constantly increasing.

With whom to sign a leasing contract?

In a leasing contract, the lessor can be a financial organization or a car manufacturer. The contract must stipulate the identity of the two parties, the duration of the rental, the amount of the security deposit, the date of the first rent, the residual value, etc.

If the expected mileage is greatly exceeded or the car is returned in poor condition, the lessor has the option of deducting the warranty costs. He can also terminate the leasing contract if the rent is not paid.

satisfaction of customer

The company car is a benefit of the kind

From the moment you make a company vehicle available to one of your employees, he benefits from a benefit of any kind or ATN. This must therefore be declared and appear on his payslip. Normally, this information is at the top of the document, below the base salary. Considered as part of the worker’s income, the value of this ATN is subject to employer contributions in the same way as the salary. In addition, it will be taken into account in the calculation of payroll taxes.

What are the advantages of a company car?

On the employer’s side, making a company vehicle available to employees is an effective solution to limit costs. As far as workers are concerned, it makes it easier for them to travel and gives them a more professional image.

Limiting mileage fraud

Although confidence reigns, it is important to have exact figures to control the number of kilometres covered. If these elements were approximate, it could impact the company’s budget and expenses. Knowing the mileage of an employee’s business trips is difficult if he uses his personal car. Opting for a company vehicle would therefore be the solution. In addition to seeing the actual distance travelled, you can also trace the route and the exact location of the property, if necessary. Thus, the company frees itself from the obligation of mileage compensation.

Easier budgeting of transport costs

When a company operates its own fleet, its transportation costs are predictable and thus easier to budget for. All that remains is to plan for maintenance costs, any compensation and repair costs in the event of an accident.

For the worker, having a company car means saving money compared to the costs of owning their own car. He also does not care about maintenance, repair and insurance costs. In addition, a fuel card often accompanies a company car. Thus, he no longer pays anything, apart from income tax and social security contributions if he uses the car for personal purposes.

Presentation of a professional image

Having a company car can be beneficial for the company and the employees, in this case, the commercial agents. A new and well-maintained vehicle (with the logo on the side, for example) gives the brand a professional image and inspires confidence. With this type of car, salespeople can give prospects a better impression of the company.

Company cars: buy or rent?

If you decide to rent your company car, you will be able to spread the VAT over time. Indeed, part of it is recorded on each leasing invoice. If you opt for financial leasing, the vehicle will be entered into the balance sheet. As a result, it may be subject to an annual amortization which will be deductible from your profits. If you choose operational leasing, the vehicle will not be considered an investment. The monthly invoices will thus be included in the fees. However, it is generally impossible for you to terminate the leasing contract before the scheduled term.

Moreover, if you decide to buy a company car, you can also deduct the annual depreciation from your results. However, you will bear all the risks and costs corresponding to maintenance, repairs, etc. You are also required to pay the VAT directly.

Focus on the tax deduction for professional cars

The purchase of a company vehicle entitles you to a tax deduction on the company’s results. The amount of the car will thus reduce the amount of tax paid by the company. In addition, this type of vehicle is, in principle, depreciable over five years. The purchase price of the car will thus be increased by the amount of the company’s tax each year. This deduction depends on the date of entry into service of the car and the amount of CO2 emissions. If in 2019, you bought a car with CO2 emissions of less than 20 g/km, the deductible amount is €30,000. During the five years following the acquisition, you can deduct €6,000 annually from your taxable profits.

What about tax on company cars?

Businesses are required to pay TVS or company vehicle tax. It should be noted that this tax only affects passenger vehicles, that is to say, cars produced annually in large series. The calculation of the TVS is based on two criteria: the CO2 emission rate and the type of fuel.

In France, the TVS concerns cars registered since March 2020 and which are subject to the new registration system. It also affects cars rented or owned by a company since January 1, 2006, the first use of which occurred after June 1, 2004. These fall under the old registration system.

The TVS also takes into account the type of fuel used and the year the car was put into circulation. If your company has had a diesel car since 2018 and it emits 270 g of CO2/km, for example, the tax relating to the type of fuel used is €100. The tax relating to CO2 emissions is €7,830 (270 gx €29). The rate of €29 is that applied to cars whose pollutant emissions are between 251 g and 269 g. The total TVS is then €7,930.

 

 

Click to comment

Leave a Reply

Your email address will not be published.

Trending