I'm not VAT registered so I'd be silly to lease a car that attracts VAT wouldn't I?

Not true! VAT is paid by you on a new car whether you lease it or use a purchase scheme that doesn't attract VAT on the monthly payments. In the case of a leased car the leasing company (contract hire company) can claim back the VAT paid on the purchase price in total. As a result you only pay interest on the net cost of the car but you pay VAT on the monthly figures.

If you are VAT registered you can claim back 50% of the VAT outgoing. However, if you use HP or Contract Purchase the leasing company cannot claim back the VAT so you end up paying interest not only on the price of the car but also on the VAT content as this is an unrecoverable cost to the leasing company.

Add to this the fact that some cars will be highly discounted if leased, as opposed to provided on a purchase scheme, there is a strong case for non VAT registered companies to use leasing to acquire their cars.