Business Leasing Hub
If you're wanting to find out more about leasing a car for your business, or to learn about the process, Leasing Options' comprehensive guides have everything you need to know.
Business Car Leasing Explained
Business car leasing is ideal for upgrading your vehicle or fleet to the latest models. Instead of buying company cars outright, this option offers a cost-effective way to manage your business car needs. Plus, with tailored leasing agreements, you can choose the term, monthly instalments and initial payment amount that suits your business.
If you're new to business leasing and want to take advantage of affordable business motoring option, check out our guide for everything you need to know.
What is business car leasing?
Business car leasing or Business Contract Hire (BCH) is similar to a personal lease in which you essentially hire a vehicle for a fixed period and pay fixed monthly instalments. At the end of the lease, you give the car back with no worries about selling and depreciation.
However, with this type of leasing, the vehicle is contracted under your company name whether you're a limited organisation, public company, partnership or sole trader.
There are several benefits to business leasing, such as:
- Drive the latest models and upgrade regularly
- Fixed monthly payments to help you budget better
- Flexible initial payments to suit your budget
- No need to worry about deprecation or reselling the car
- Mileage allowances to suit your business usage
Types of business car leasing
Business car leasing differs from other types of car finance as with this option, you agree to a fixed monthly cost over a specific period and give the car back at the end of the contract. However, unlike Business Contract Purchase (BCP) and Business Lease Purchase (BLP), there is no option to buy the vehicle.
There are several types of business car leasing, including:
Business Contract Hire (BCH)
Business contract hire is a business lease agreement suitable for a range of companies, such as sole traders, partnerships and limited companies who don't want to own the vehicle at the end of the contract.
Similar to standard business contract hire, self-employed BCH works in the same way but is tailored to sole traders and self-employed individuals. For more information, check out our guide to self-employed car leases.
How does business car leasing work?
Leasing a car for your business is a simple process. At Leasing Options, our team of experts are available to help from start to finish, and you get a dedicated Account Manager to handle your lease and any questions.
Here's what to expect when you lease a business vehicle.
Business car leasing process
- Select your preferred car – Search our stock and check out the latest deals for affordable leases
- Get a quote – Once you’ve decided on the term, mileage and extras, request a quote
- Apply for finance – Complete a finance proposal form, and our team will help you get the best business lease contract based on a credit check and circumstances
- Sign the documents – Once finance is in place, sign to complete the contract
- Arrange delivery – Your account manager will arrange delivery at a suitable time. If the car is not in stock, you will receive an approximate date with further details on when it will arrive
Check out our guide to taking out a business lease for more information on the process.
How to find the right business lease
Business leases are an ideal way to get the best company cars at an affordable monthly cost. However, there are a few considerations to ensure you get the right car lease for your needs, such as:
- Pick the best vehicle for your needs – Consider the most fuel-efficient models to reduce running costs or think about switching to an electric fleet for more cost savings. Take a look at the latest business lease special offers for more details
- Consider the initial payment – This first rental payment is flexible, but the more you pay, the less monthly instalments will be
- Estimate your expected mileage – Calculate how much your business will use per vehicle to avoid any excess mileage fees at the end of the agreement
- Consider a maintenance package – Adding a maintenance package to your lease means you get servicing, repairs and general maintenance included. So, there's one less thing to worry about
- Costs of ending the contract early – If you decide to end a business lease, there are charges to pay
- Wear and tear policy – Every business car lease includes a fair wear and tear policy; any damage over this will incur a fee
Who can take out a business lease?
Most organisations can take out a business lease no matter how long they've been trading. These include:
- Limited Companies (Ltd)
- Public Limited Companies (PLC)
- Self-employed/sole trader
- Limited Liability Partnership (LLP)
- VAT-registered and non-VAT-registered companies
In most cases, businesses must have a good or excellent credit score. However, business leasing with bad credit is possible.
Business leasing benefits
There are several business leasing benefits, such as:
1. Motoring costs in one place
In a business lease, you pay fixed monthly costs, which include road tax. This helps to keep costs simple. You can also select a maintenance package and insured business leasing, which places your car costs under one monthly instalment.
2. Improved cash flow management
Instead of spending a sizeable one-off amount on company vehicles, leasing helps spread the cost for improved cash flow and budget management. This also helps make the balance sheet look healthier, as you won't have lots of substantial fixed assets.
3. Get the latest models and technology
Leasing gives you the option of regular upgrades, so you have the opportunity to provide your business with the latest model, technology and safety systems for an affordable cost.
4. Go green with ease
It’s simple to switch to electric with various electric business lease options. Not only are they better for the environment, but you also benefit from tax advantages such as lower BiK rates and better fuel efficiency.
5. VAT savings
If your business is VAT-registered, you can claim 50% VAT back on your initial and monthly costs. This rises to 100% of the vehicle is purely used for business purposes.
6. Reclaim costs through corporation tax
Limited companies with lease vehicles can claim up to 100% of the monthly payments against their corporation tax bill. If you take out a maintenance package, this cost can also be offset.
7. Improves staff perks
Providing company cars to employees is a great way to improve the benefits package in your organisation. However, this perk attracts Benefit in Kind (BiK) tax. If employees opt for a zero or low-emission car, the rate is lower than standard petrol and diesel vehicles.
Business leasing considerations
Alongside the benefits of business leasing, there are a few considerations to ensure this type of lease meets your needs.
Some factors to think about include:
- Mileage – Calculate your business mileage accurately to avoid excess charges at the end of the contract
- The business doesn't own the vehicle – At the end of the agreement, you hand the car back
- Fair wear and tear – Every lease car is subject to a fair wear and tear policy. Anything over the normal wear and tear is subject to charges
- Ending the contract early – If you need to end a business lease early, charges are applicable, which can sometimes be costly
How does business leasing work with tax?
If you're new to business leasing, you may wonder what tax implications come with this type of agreement. Fortunately, business car leasing offers several tax benefits, including:
- Road tax is included in your lease agreement, so you don't have to worry about a separate payment
- As you&pos;re not buying a car outright, a lease car doesn't appear on the balance sheet, and there are no depreciation costs to calculate
- If you use a company car solely for business, you can claim 100% of the VAT back on payments. If there's an element of personal use, this drops to 50%. Your company has to be VAT-registered to claim this back
- Leasing is tax deductible, so up to 100% of monthly payments, including the initial rental, can be offset against your corporation tax bill (limited companies only and depending on emissions). If you have company vans, 100% can be claimed, whatever the emissions level
- If you opt for a maintenance package or are charged excess mileage fees, you can claim 100% VAT back, plus costs can be offset against your tax bill
- BiK with business leasing is subject to emissions levels. But the lower the emissions, the lower the rate, so you're employees will be paying less.
Check out our company car tax guide for more information
What are the differences between a business and a personal lease?
If you're considering whether a personal or business lease is best for your business, there are a few key differences:
Business car leases are, as expected, used for business purposes. However, you can also use this car for personal use (this is subject to company car tax).
With personal leasing, you can drive your car to and from work, but it can't be used for any business reasons.
Name on lease contract
If you opt for a business lease, the contract sits under the company name. In a personal lease, this is under an individual's name.
Claiming VAT savings and tax benefits
If you're VAT-registered, you can claim up to 100% of the VAT back and offset payments against your tax bill. However, personal leases do not have this option.
Learn more about business vs personal lease cars in our guide.
How does business leasing insurance work?
Business lease cars must have a fully comprehensive insurance policy. Your company can arrange this, or there's the option of an insured lease agreement.
With the insured lease option such as our Fuel & Go package. This includes fully comprehensive cover, maintenance, breakdown cover and accident management. It also covers family, spouse and other company employee use (as long as they meet the driver criteria).
The additional cost of this package can be offset against tax alongside your monthly payments.
Do I need to maintain a business car?
Yes, you are responsible for ensuring your lease car is in good condition and works as it should throughout the agreement. In addition, servicing and maintenance must be carried out per the manufacturer's recommendations.
At the end of the lease, it's also subject to a fair wear and tear policy, and anything over the general usage wear is invoiced to your company to rectify.
If you want to take the hassle out of upkeep, choosing a maintenance package is a great option. This small additional cost includes all your required servicing and maintenance needs and covers repair work where needed.
What happens at the end of a business lease?
Returning your company cars at the end of a lease is pretty straightforward. But there are a few things to do to make the process hassle-free. This includes:
Prepare for the end of the lease
- Make sure the car is clean, and remove any company belongings
- Check nothing has been removed from the vehicle, such as the parcel shelf or spare tyre
- Inspect the car for damage
- Ensure you have the paperwork for the vehicle, such as the V5, service handbook and vehicle handbook
Contact your account manager to arrange the collection of the vehicle. This can be done at a time to suit your business, but generally, collection is Monday to Friday between 8 am and 6 pm.
Vehicle inspection and collection
When the collector arrives, they will inspect the vehicle according to the BVLRA fair wear and tear standards. This checks for any substantial damage and ensures the car is in the best condition possible with average usage wear. Once they have filed their report, you can see a copy and sign to say you’re happy with it. The vehicle is then taken away, and further inspection is carried out.
Any excess damage incurred will be invoiced and needs to be paid in full before the contract can be signed off and ended.
If you want to upgrade your vehicle, you can start the renewal process at a similar time to your current contract ending. This way, you will have a new car ready to go once the previous one is collected. Renewals are really simple, just follow the business car leasing process to pick your next vehicle.
Business car leasing FAQs
Below we cover the most commonly asked questions about business car leasing.
Is it worth leasing a car through the business?
Yes, business leases provide various tax benefits and are usually cheaper than personal lease options.
Why is a business car lease cheaper than personal leasing?
The key difference between the two lease options is VAT. With a business lease, you can claim up to 100% of VAT back if solely used for business purposes. Plus, there are savings on maintenance and insured leasing packages.
Is a business lease worth it?
Business leases can benefit a wide range of organisations, including limited companies, partnerships and sole traders. Benefits such as tax savings, fixed monthly costs and access to the latest cars are just some examples to enjoy.
Can I lease a car if I'm self-employed?
Yes, self-employed people and sole traders are eligible to apply for a business lease.
Can a new business lease a car?
New businesses are eligible to apply for a business lease. Companies trading for less than two years may have to provide more financial information as requested.
Are business lease payments tax deductible?
Yes, limited companies can offset monthly instalments against corporation tax. However, the percentage is subject to emissions. Although company vans are 100% tax deductible regardless of emissions.
Can I buy the car at the end of a business lease?
No, Business Contract Hire (BCH) agreements require you to return the vehicle at the end of the lease. If you do want to purchase the vehicle, contact your finance company as they may be able to help you.
What information do I need for a business lease?
You will require business documents such as:
- Company registration number and address
- Director's information
- Business bank statements
- Up-to-date financial accounts or management accounts
What is the benefit in kind (BiK), and how does it affect a business lease?
Benefit in Kind (BiK) is a perk received by employees. For example, you lease a company car for staff members. This is subject to tax, and HMRC defines the amount payable. In regards to a business lease, as a company, you lease as normal, and your payroll department calculates the tax.
Why should I lease through my business?
This type of lease is a great option for many organisations. For example, there are several benefits, such as tax savings, access to the latest models, and fixed monthly instalments.
Can a business lease be used for personal driving?
Yes, you can use a company car for personal use. However, this is subject to Benefit in Kind (BiK) tax.
Can I lease a business fleet?
Yes, depending on your company's financial position, credit check and requirements, leasing a fleet for your business travel needs is possible.
Business Contract Hire is a great option for many companies. So, if you're new to business leasing and are considering this option for your organisation, contact our expert team for more details.
In Stock Car Lease Deals Available Now
Leasing Options understands waiting for a new car isn't always possible. Maybe your lease is ending or your car is old, or you like new models. Regardless, we offer in-stock car leases to meet your needs, which could be delivery within as little week.View in stock deals