When leasing a car, several essential factors can affect the cost of your deal. One of them is the road tax charged on the vehicle.
Road tax is a compulsory levy for all road users. However, many people are confused about how road tax affects their lease. They want to know what it is and who should be responsible for paying the road tax in a lease agreement.
If you fall into this category, you’re at the right place. This piece will teach you exactly how road tax applies to your lease.
What is Road Tax?
Road Tax, also known as Vehicle Tax or Vehicle Excise Duty, is an annual tax that vehicle owners pay to enjoy the right to drive and park on the road. You may pay this levy monthly, annually, or biannually depending on your financial state.
Road tax is a legal requirement. Therefore, all vehicle owners must pay this amount or face sanctions by regulatory authorities.
Road tax protects the environment from the pollution that cars emit. This levy was implemented to dissuade people from using old and inefficient cars.
The cost of your Vehicle’s Excise Duty depends on the age and model of the car. Vehicles with older engines are prone to environmental pollution and will pay more road tax, while newer engines will pay less.
The engine size will also affect the value of your road tax because it determines fuel consumption and the amount of carbon emissions the vehicle produces.
How Is Road Tax Calculated?
In the past, vehicle tax was levied based on the size of a car’s engine only. The engine size would determine the fuel consumption and amount of carbon emissions the vehicle produces.
But today, the cost of road tax for any vehicle is dependent on the amount of CO2 emissions that it produces. Regulatory authorities have decided that using a vehicle’s engine size to measure its road tax was ineffective. They needed a system to let them correctly determine how much carbon every vehicle releases.
What’s The New Road Tax Measurement System?
There are thirteen car tax bands in this new road tax measurement system. These bands represent the different emissions levels that vehicles produce when in use – they are calculated based on the CO2 emissions in grams per kilometre driven.
If your car has relatively low vehicle emissions, you could end up as low as £0 per year. Vehicles that fall into the highest category may end up spending up to £2,365 per year.
Is Road Tax Included In A Lease Agreement?
All cars are expected to pay road tax, including lease vehicles. Lessors treat this tax using various approaches.
If you’re working with a reliable service provider, an example being Lease Loco, you’ll get an agreement that will fit you like a glove. While some service providers will add the road tax to your monthly payments, others will add it to the overall cost of your lease.
For Personal Contract Hire and Business Contract Hire, the lessor will be responsible for paying up all road tax levies because they will remain the vehicle’s registered owner.
However, if the vehicle tax increases after some years, the client will be liable for the increase. The lessor will inform you of the total amount that will eliminate your road tax payment deficit.
Why Is Road Tax Important?
As a vehicle owner, it is important to note that road tax is essential, and failure to pay it will result in a fine.
Nowadays, there’s no excuse to miss your vehicle tax payment. The increased reliance on the internet has made it easier to pay your road tax and check your due date.
Also, when you work with a top-rated car leasing company, you won’t have to worry about forgetting to renew your road tax.
Your car leasing agreement will account for your road tax payment, and it will be included in your initial rental and monthly payments.
Conclusion
And that’s all on how road tax will affect lease vehicles. Leasing a car is a great alternative in today’s world because it allows you to gain access to a car without paying outright.
However, before signing a lease agreement, you must remember that your payments will be subject to road tax. While the lessor may be responsible for covering some of the cost, you’ll bear more of this financial burden.
