Reset
You can reset your 'Lease or Buy' analysis at any time by clicking on the 'Reset' button above.
What Does Our 'Lease or Buy' Analyser Do?
Our Business 'Lease or Buy' Analyser compares the cost of buying a car outright with finance.
You can compare outright purchase with:
In fact, you can compare any combination of the above finance methods and you don't have to look at outright purchase in the mix.
However, if you have the cash available to buy a car outright, we can also look at the business cash-flow impact of using any of the above finance methods for up to 5 years and 30,000 miles per annum.
You can also change the price of the car, the advance payments (you can even treat this as a deposit for hire purchase) and also the individual monthly payments.
We also calculate Corporation Tax relief and Value Added Tax. This allows you to see the impact of unrecoverable VAT on finance such as contract hire and leasing.
Don't worry if you make a mistake - just click on the 'Reset' button above to start again.
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Getting Started
Step 1: Your Business Profile
To begin you'll need to set up information about your business.
You can use the standard data to get started, or complete all the data for your business (this calculator is for limited companies rather than partnerships or the self-employed).
Business Tax Rate
Currently the standard rate of Corporation Tax for limited companies in the UK is 25% (from 1 April 2023).
If your business is subject to a different rate of Corporation Tax then please change the value to match your company's circumstances (e.g. for smaller companies with profits of £50,000 the rate is 19%).
You can find more information about Corporation Tax rates on the GOV.UK website.
For simplicity, on Corporation Tax we will assume that the car is purchased on the first day of the business tax year.
For electric cars, this means that the full year's tax relief will be available at the end of the first year of ownership, assuming you qualify for the 100% first year allowance.
For other cars, the capital allowances rules will be applied according to the current rules for main rate allowances or special rate allowances.
You may therefore see different results within the cash-flow forecasts (if you have set the 'Return on Capital' above '0%'), as each year's capital allowances are calculated either:
- at the end of the first year (for electric cars); or
- during each year of ownership.
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VAT Recovery Rate
Currently the standard rate of VAT is 20% and the VAT Recovery Rate is normally 20% too. However, in leasing cars there is a restriction on the amount that can be recovered.
We will take this into account in our calculations anyway, so you do not normally need to change the VAT Recovery Rate as we will assume that only 50% of VAT can be recovered on leasing.
Please note that this does not apply to certain businesses (such as those in the taxi or driving school trades which may be able to recover a higher percentage of VAT on leased assets).
VAT Periods
Typically companies will have VAT periods of one month or one quarter. Some smaller businesses with have an annual VAT period. You can select the VAT period that applies to your business.
Can You Pay In Cash?
If your company has sufficient cash available to pay for the car then select 'Yes'.
We will then ask for the 'Return on Capital' in your business for the cash-flow forecasts.
We'll automatically set the 'Return on Capital' to 5% p.a. as a start, but you can change it to any appropriate value for your business.
The 'Return on Capital' is set as a net of tax return in your business. This allows us to calculate how much your business will earn on the cash-flows tied up in funds applied to purchase and leasing, etc.
If you do have the cash available then click on 'Yes' and we'll calculate the cash-flows for each selected funding method.
If you don't have the cash available to buy outright then click on 'No' and we will set the 'Return on Capital' to '0%' and you won't be able to see cash-flow forecasts.
Remember that we won't keep any data you provide for the 'Business Profile'.
Once you leave our site and close the browser window any data will be erased from our servers, but remember that your web browser may keep your browsing data for a period of time and this is beyond our control.
Also, if you leave your computer, tablet or phone for a while when using our 'Lease or Buy' analyser then your session on this web site will eventually 'time-out'.
We'll then wipe the data to help prevent someone else from seeing it (but please don't rely on that - just close your browser window and come back to us later).
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Step 2: Car Selection
Next we'll ask you about the car you want to analyse.
Simply select a car from the manufacturer list, then you'll see the model range and finally the 'derivative' (or 'trim' level).
Once you have selected the vehicle you're ready to select the finance.
Government Grant Assistance
If you have selected a qualifying vehicle for Band 1 or Band 2 for the electric car grant then you will need to manually change the price of the vehicle or the monthly finance payment.
This is because the number of vehicles eligible for the grant is limited, the grant amount may change according to 'Band' category and the existence of the grant has in the past been both limited and occasionally removed from time to time.
We recommend that your check the GOV.UK website for the latest information on grants for electric cars and then adjust the price/monthly finance payment for the car accordingly.
Step 3: Finance Profile
Term
Start by choosing the 'Term' for the finance agreement.
This is usually how long you will keep the car, and is typically 12, 24, 36, 48 or 60 months.
Advance Payments (or 'Plan')
You can then select the advance payments to be made for finance.
This is because vehicle finance is usually denominated by the 'Term' or period you will keep the car and the number of advance payments that need to be made as a deposit.
The deposit is normally a multiple of the monthly payments to be made.
For example, a typical deposit is between 1 and 12 months. 3 months or 12 months in advance is typical for business leasing or finance.
Sometimes a fixed amount (such as 10% of the purchase price) is used, for example in Hire Purchase (in which case you can change the amount).
Miles
Once you've selected the advance payments you can select the annual mileage you will travel each year.
This is because car finance such as contract hire and contract purchase is often based on your annual mileage.
Why? Well, the finance company needs to predict the value of the car at the end of the finance period.
This is so the finance company can allow in its own accounts for the risk in case you don't purchase the car at the end of the finance agreement, or in case you want to sell the car back to the finance company at the end of the lease.
We'll also calculate the expected value of the car if you have selected outright purchase.
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Finance Selections
Next you can choose which finance methods to include in your analysis.
The options are:
Each of these finance methods is explained in the links above - just click on the links to read more and we'll keep your place here.
Simply check the item if you want to include it in your analysis (just uncheck them to exclude).
Step 4: Individual Finance
You can change all of the individual finance contents including the vehicle price or the monthly rental.
For example, in outright purchase you can change the vehicle price, options, delivery charges, registration fee, tax disc, On-The-Road price, forecast residual value, end-of-term costs (such as refurbishing the car for resale) plus CO2, fuel type, etc.
Alternatively, for contract hire you can change the initial rental payment (the 'advance rentals'), monthly rental payment, initial admin fee for the contract and any end of contract charges (e.g. if the vehicle has outstanding damage when returned to the leasing company).
Depending on the finance methods you have chosen these include:
- vehicle price and cost of options;
- tax disc and registration fee;
- CO2 output and fuel type
- monthly advance rentals and monthly payment;
- any administration fee for the contract;
- residual value or end-of-term/contract charges.
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You're Ready To Go!
Once you've completed the business profile, vehicle selection and finance you're ready to see the analysis results.
Click on the 'Next' button under the last finance methods selected in order to see the results.
Depending on your business profile, vehicle and finance selections we'll show you:
- the payments for outright purchase, plus finance for the car from contract hire, contract purchase, hire purchase and leasing;
- the total cost for finance for the car (this is not not necessarily the same as the above item);
- the residual value of the car or any renal rebate (e.g. for balloon or finance leasing)
- the cost of rentals excluding recovered VAT;
- tax disc renewals (or vehicle excise duty);
- 'end-of-contract' charges (if you have included these);
- tax relief (if you have indicated your corporation tax rate;
- the net cost impact of using the selected finance methods;
- the cash-flow impact to your business of buying outright compared to the finance alternatives.
In our introduction to 'Lease or Buy' you can read about finance - we'll keep your place here until you've read the explanation.
So let's get started on your 'Lease or Buy' analysis - just click on the link below: