Choosing the car

The price that your firm pays for your company car is usually cheaper than you can get it with cash.

This is because leasing company fleet buyers get substantially bigger discounts off cars' list prices than private buyers (typically 15% rather than 5% or 8%) because they're buying in bulk.

Big lease companies also pay lower interest when financing their purchases.

According to one of the country's leading lease companies, Lex, company cars are currently financed at around 6.5%, while a typical PCP or loan for a private buyer is around 10%. The lease company's benefit then gets passed on to you.

Then there are VAT advantages. Lease companies reclaim 50% of the VAT on your firm's monthly rental charge, and 100% of the VAT on maintenance, with most of the savings also passed on to you.

Lease companies deduct the residual value from the list price and charge your firm only on depreciation.

A 30,000 car might have a residual value of 12,000, so the lease company will charge for finance on 18,000.