Buying a car for your company is similar to buying one for yourself. However, there are several things to consider when purchasing a vehicle in your company’s name.
There are many requirements you will encounter when purchasing a car through your company. From finance to taxation, there are different rules to follow at each stage.
Businesses can use some of the tax benefits that come with buying a car through your company. You can take advantage of these tax benefits, especially if you have staff members who need to drive frequently. To know the benefits and privileges of buying a car through your company, Read more.
Steps to buying a car through your business
Requirements for Business Car Financing
When applying for business vehicle finance, the first step you must take is to check your personal and corporate credit rating. This is done so that lenders can simultaneously assess your risk profile and repayment capacity.
One of the requirements for Business car finance You’ve given the bank permission to check your credit history, so it’s essential to be prepared in advance. You will be able to correct any errors and compensate for unpaid payments.
Appropriate documentation must be obtained to meet your lender’s financial needs. The documents include some of the following:
A copy of the identification documents of any partners or shareholders, business registration and VAT number, if required.
- A complete list of contact details including corporate address;
- Details of trustees, members and directors;
- balance sheet and banking information for the company; (if acceptable)
- Specific information about the vehicle you want to finance.
Before submitting your application to the lender, if you do it online, you must complete the appropriate documents and scan and upload the required documentation.
Check your business credit score when buying a car
You should get your company’s credit score before going to the dealership. Business credit scores range from 0 to 100. You should qualify for a loan if your credit score is above 80. If your business has bad credit, leasing a car may be a better option than buying one.
Find the right dealership
Check out the many dealerships in your area that offer business financing and deliver vehicles. Many businesses may offer special programs and even fleet savings if you purchase multiple vehicles. The most popular lenders include:
- The bank where you have your business account. Check if they offer lower prices to businesses they have accounts with.
- Online lenders specialize in auto loans for commercial purposes.
- A large dealership with finance department.
You must register a vehicle with the DVLA after purchasing it Depending on your home state, you may have to submit different papers and shell out for different fees to get a commercial vehicle. It will be helpful if you are ready to provide proof of insurance wherever you are.
Understanding the tax benefit implications
If you want to use the automobile for business and personal travel, you can benefit from purchasing it through your company. Below are the benefits of buying a car through your business and from various methods
Loan / Hire Purchase
Under a loan or hire purchase agreement, tax relief can occur if the vehicle’s running costs, such as insurance, repairs and fuel, are paid by the business and are deductible in the tax calculation profit.
In addition, capital allowances can be claimed. These are a type of depreciation that is tax allowable and the deduction rate can depreciate anywhere between 6% and 100%, depending on certain factors, such as the make of the car (ie: brand new or previously used), and its carbon emissions.
Limited companies can use the vehicle for personal reasons and get tax benefits through Benefit in Kind (BIK). Govt Efforts are being made to encourage entrepreneurs to buy electric cars by providing tax relief incentives for the initial car purchase price and lower BIK rates.
If you pursue this option, they will be responsible for the running costs of the vehicle, but then they will be eligible to claim business mileage back. For cars, people can claim 45p per first 10,000 business miles in the tax year and then 25p above that number of miles.
These rates are HRMC-approved, and the company can then claim any tax relief on the amount refunded. If the Company has paid you at the rate mentioned above, any excess will be a BIK.