Moving on leased company cars that are no longer required

October 28, 2016

Fleet managers face a conundrum when dealing with lease cars that are no longer required because an employee has left the business or a car is upgraded before the lease contract ends for example. Addressing this, Automobilwoche has highlighted three options for moving on leased company cars in Germany that are surplus to requirements and what the tax implications are; early return of the leased vehicle, leaving the car unused and renting on the leased car. 

The first option is to simply return the car but this usually incurs a penalty as the book value may be higher than the achievable market value. This penalty is immediately payable but many dealers offer the opportunity to spread this cost by adding it to the leasing rate for a new car. However, part of the cost then becomes a taxable benefit whereas the one-off payment option is not subject to tax. 

A second way to deal with a leased car that is no longer needed is to simply leave it idle. However, the customer should deregister the car, to save on insurance costs and tax. Moreover, from the month after the vehicle has been deregistered, any monetary benefit is no longer taxed. If the vehicle remains registered, the monetary benefit is still taxable as the car could be used privately. 

A final option for the customer is to rent the leased car on until the contract expires. This then contributes to the leasing and running costs, although it may not cover them in full – especially if the car is offered at a discounted rate to a family member for example. 

The implications naturally vary in different countries but factoring in issues such as staff turnover and how often cars are upgraded prematurely (maybe stamping this out if necessary) should be considered by fleet managers in their risk assessments if this is not already the case.

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March 31, 2017

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