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Pay Lower Sales Tax When Taking a Car on Lease

Car leasing has emerged as a lucrative option for those looking to buy a car. The obvious benefits are that you have to block lesser cash as down payment and also the monthly lease charges are much lower than the loan payments that you will have to dole out when buying a car.

But there are some more hidden benefits that a layperson may not be aware of. One of them is sales tax. While you have to pay sales tax on both purchased cars and leased cars, there is a sharp variation in the tax amount that you are required to pay.

Indeed, the scales tilt in favor of car leasing once again as you have to pay sales tax on the entire value of the vehicle when you opt for a car purchase. On the other hand, when you lease a car you are required to pay tax only on the amount of the lease. In other words, you incur tax only on the leased vehicle's depreciation, and not its full selling price. And this sales tax benefit is the same in the case of both personal contract hire and business contract hire.

For instance if a customer is purchasing a Mercedes car worth £50,000, he has to pay sales tax on the entire purchase cost of the vehicle. If the current sales tax rate is 5%, he will have to pay £2,500 additionally which is generally rolled into the loan amount. But if you opt for car lease London, you are required to pay sales tax on the monthly payments only. To follow the above case, if the monthly lease price tag of the same Mercedes car is £599 before tax for a period of 3 years, the monthly tax amount will be only £29.95. So by the end of the lease period, you will only incur about £1078.2 as tax payment. A direct saving of more than £1400!

But you should always keep in mind that car lease providers always advertise the monthly lease prices without adding the tax due on it. So don’t be taken in by the enticingly low figures; always factor in the taxes that will be payable thereon. Also remember that if you are required to make a down payment for the car lease London, tax will be payable on this amount as well.

To sum up, you can save a lot of money on both business and personal contract hire by way of tax payments. While this may not be obvious to you, a good car leasing broker is that which not just compiles the best and cheapest deals across the market, but will also make it a point to educate you about these less apparent benefits as well as any pitfalls of opting for a car lease.

Author’s Bio: This article is written by Brad Carlton about the Car lease london.If you are required to make a down payment for the car lease London, tax will be payable on this amount as well.