Can I Lease A Car For My New Business?
Compared to buying outright, leasing a car is often a more affordable option for new businesses. Not only can it be cheaper, but it also provides more freedom. If you are wondering how to qualify for a car lease, read on to find out more.
Can my new business lease a car?
If you are a Limited Company, PLC or a partnership, you are eligible to apply for a new business car lease. This also applies to both VAT registered and sole-traders.
Charities, local businesses and even embassies are also eligible. This shows that there are few barriers to business owners applying for a leased car.
How do I qualify for a business car lease?
For a new business to qualify for leasing, the business and directors may have to go through a credit check.
This is to verify that you will be able to continue making the payments throughout the full duration of the contract. It will involve the finance company reviewing your company history, including past payments, any public legal filings and to see how long you have been trading for.
There may be some instances where the finance company will request further evidence about the financial status of the business. This will vary depending on the company performing the checks, but if you are not able to produce the required documentation, it is unlikely you will successfully secure the lease.
The finance company may ask for some of the following information:
- Bank statements covering the last 3-6 months
- An opening balance sheet of your business account.
What happens if I don’t have these documents?
As a new business, you might not be able to provide your accounts. In this case, the finance company may ask for additional documents, such as a realistic cash flow forecast.
We do have a specialist funder for new start businesses and other unique business structures – please ask your Account Manager for details.
What happens if my business has bad credit?
Once a credit check has been performed, an additional check may be carried out on the director/directors. If the company does not have a good credit score, a director’s guarantee may be required in order to lease a vehicle. This means they act as a guarantor throughout the duration of the lease. If the payments are not maintained by the business, the director could then become responsible for the outstanding balance.
New businesses and companies with bad credit may be asked to commit more money upfront as an initial payment. This gives the finance company more protection in the event of a default at a later stage. Your Account Manager will discuss this with you.
Read more about bad credit business leasing in our helpful guide.
Why should I lease a car for my new business lease?
Here are the top three benefits that leasing can offer to new businesses
1. Cost effectiveness
Every business needs to maintain strong levels of cash flow. While paying for a car outright is an option, the moment you take it out on the road, it is a depreciating asset. Your cash flow will also take a significant hit if you choose to buy a car first-hand.
By leasing you are only committed to the car for a fixed period and the monthly payments often prove cheaper than paying upfront for it.
In most cases, leasing allows you to decide how much money you want to commit to the initial payment. This leaves you in control of your cash, while ensuring you maintain flexibility over your business finances in the short and long term.
If you take advantage of our maintenance package, you also get the benefit of spreading all servicing and MOT costs, which further aids cash flow. You can learn more about leasing with maintenance here.
2. Time saving
Running your own business, especially in the early stages, means your time is largely taken up on trying to make it successful. If you need to find a car or fleet, it can prove difficult to find the time to go through various websites comparing specs, deals and prices.
Working with someone like Leasing Options means all you have to do is make an enquiry and complete some paperwork. We do all the hard work for you based on your exact requirements, taking any stress away from the situation.
We will assign you with your own dedicated Account Manager who will help and guide you through the leasing process.
3. Tax benefits
Another great incentive are the tax benefits that come with new business car leasing. Taking out a contract hire car will enable you to claim back an element of the VAT on both the initial rental and monthly payments. However, this only applies if you are a VAT registered company. If the car is used purely for business purposes only, there may be other tax benefits available.
Depending on how much carbon dioxide your car emits, you may also be able to offset the rental costs against your monthly tax bill. You can claim back a percentage of your tax dependant on your vehicle's CO2 emissions – ask your Account Manager for more details.
Whether you need a car or a van, new businesses don’t need to miss out. If you’re ready to take the plunge and start leasing now, make sure to see our special offers for our latest deals on company cars.