Personal car finance: tempting offers, ease of administration and 45p per business mile tax free are some of the reasons small business owners are turning to personal car finance

Editor’s Blog on popularity of personal car finances

IT’S NOT hard to understand why drivers are suddenly looking towards personal car finance as an excellent way to fund a new car.

The Finance & Leasing Association reports that in the year to May 2011, 56% of new car sales used motor finance – the highest share of the market since March 2009.

Given that inflation is stretching household economies, paying out a large chunk of capital to purchase a new car is not the best way to look after cash flow – as our news story on Personal car finance increases in popularity shows.

Personal finance leases, or personal car purchase (PCP) agreements allow you to drive a new car with low monthly payments. And you don’t have the hassle of selling the car at the end of the period.

I’ve blogged about this before – see Blog 596: SME Networking and business car leasing – but during a recent networking event with small businesses, the majority were contemplating a new car with a personal lease rather than purchasing outright.

And one advantage of using a personal lease for a business owner is that the car stays outside of your company, but any business mileage can be easily accounted for using the AMAP repayment method of 45p per mile, which only reduces to 25p per mile after 10,000 business miles.

Potentially, you can drive 10,000 business miles in your personal car and claim back