Guide
Business car leasing
Whether it's a runaround for a sole trader or a while fleet of company cars your after, business car leasing could be the perfect solution. Find out why.
Words by: Andrew Woodhouse
Published on 15 August 2019 | 0 min read
Business car leasing can be a cost-effective and easy way to provide a vehicle or whole fleet to your business. In this article, we explore business car leasing, also known as business contract hire.
What is business contract hire (BCH)?
Business contract hire (BCH) is a form of vehicle leasing suitable for business owners, including sole traders, partnerships and limited companies.
With BCH, you pay a deposit and a series of monthly payments. BCH can be used for individual vehicles and fleets of vehicles. At the end of the contract, you return the vehicle. If you’re looking at leasing a car for yourself, take a look at our article on personal contract hire (PCH).
With BCH, you pay a deposit and a series of monthly payments. BCH can be used for individual vehicles and fleets of vehicles. At the end of the contract, you return the vehicle. If you’re looking at leasing a car for yourself, take a look at our article on personal contract hire (PCH).
How does business car leasing work?
Each business car leasing contract will have its own terms and conditions, so make sure you shop around and find a deal that’s best suited for your business.
That said, many business car leasing contracts have similar features. The basics of business car leasing are: • You’ll rent the car for a fixed length of time, normally 24, 36 or 48 months • You’ll pay a fixed amount each month • You can lease individual vehicles, or arrange to lease a fleet • You can add maintenance packages that can include things such as servicing and MOTs • You’ll give the vehicle(s) back at the end of the lease contract
That said, many business car leasing contracts have similar features. The basics of business car leasing are: • You’ll rent the car for a fixed length of time, normally 24, 36 or 48 months • You’ll pay a fixed amount each month • You can lease individual vehicles, or arrange to lease a fleet • You can add maintenance packages that can include things such as servicing and MOTs • You’ll give the vehicle(s) back at the end of the lease contract
Who is eligible for business car leasing?
Business car leasing is nominally available to sole traders, partnerships and limited companies. You will have to prove your eligibility though.
Most business car leasing companies will ask you to provide banks statements and/or audited accounts to show you are an operating business. You will normally also have to provide both a proof of address and ID for the main company director. In most instances, you’ll also be subject to a credit check. This may include access to your business registration details.
Most business car leasing companies will ask you to provide banks statements and/or audited accounts to show you are an operating business. You will normally also have to provide both a proof of address and ID for the main company director. In most instances, you’ll also be subject to a credit check. This may include access to your business registration details.
Why choose business car leasing?
Business car leasing is growing in popularity thanks to the wide range of vehicles available to lease, tax benefits of leasing and the chance to avoid depreciation when changing your business vehicles.
Some of the top benefits of business car leasing include: • Less capital-intensive than buying a car • Fixed monthly cost, for improved cashflow forecasting • VAT and corporation tax may be able to be reclaimed • Driving the latest cars, with improved safety and fuel economy • No hassle of selling the car or dealing with depreciation
Some of the top benefits of business car leasing include: • Less capital-intensive than buying a car • Fixed monthly cost, for improved cashflow forecasting • VAT and corporation tax may be able to be reclaimed • Driving the latest cars, with improved safety and fuel economy • No hassle of selling the car or dealing with depreciation
Budgeting for business car leasing
As business car leasing is a fixed monthly cost, budgeting is normally a straightforward job. This monthly cost can also include maintenance and servicing packages depending on the details of your contract. Learn more about car leasing maintenance packages.
Meeting your car leasing budget usually means staying within the agreed mileage limit, as going over this can result in additional fees. That said, knowing your mileage limit means you can budget for projected fuel costs that line up with the mileage cap. Business car leasing is also popular among business owners because you don’t have to spend your cash on a depreciating asset, which means you could invest it in your business in other ways. Just remember you can’t sell the car, you have to return it, so you don’t have any assets at the end of the lease.
Meeting your car leasing budget usually means staying within the agreed mileage limit, as going over this can result in additional fees. That said, knowing your mileage limit means you can budget for projected fuel costs that line up with the mileage cap. Business car leasing is also popular among business owners because you don’t have to spend your cash on a depreciating asset, which means you could invest it in your business in other ways. Just remember you can’t sell the car, you have to return it, so you don’t have any assets at the end of the lease.
How much does a business car lease cost per month?
The amount you pay per month will depend on things such as the car you choose, the mileage limit you opt for, and other factors like the size of your deposit.
It can also vary depending on your provider, so be sure to shop around for a business car leasing deal that fits your budget and check the terms and conditions.
It can also vary depending on your provider, so be sure to shop around for a business car leasing deal that fits your budget and check the terms and conditions.
How long do business car lease contracts last?
Business car leasing contracts tend to last between 24 and 48 months, giving you and your employees the chance to choose and drive the latest cars.
Long-term car leases tend to involve lower monthly payments, but keep in mind you may have to pay more in other things such as insurance or servicing over the duration of the lease. When looking at the length of your car lease, factor in any warranties. If warranties last a certain amount of time, this could help inform how long a lease contract you sign up for. Remember to ask if the warranties apply to labour or any specific parts.
Long-term car leases tend to involve lower monthly payments, but keep in mind you may have to pay more in other things such as insurance or servicing over the duration of the lease. When looking at the length of your car lease, factor in any warranties. If warranties last a certain amount of time, this could help inform how long a lease contract you sign up for. Remember to ask if the warranties apply to labour or any specific parts.
What kind of cars can I lease for a business?
Business car leasing allows businesses to provide the latest vehicles, often at lower prices.
You may find the best business car lease deals are on specific makes and models, and even certain colours or trim levels. If you want something specific, you may have to pay more. That said, there’s a great range of business car leases available today.
You may find the best business car lease deals are on specific makes and models, and even certain colours or trim levels. If you want something specific, you may have to pay more. That said, there’s a great range of business car leases available today.
Wrapping a lease car
Many businesses opt to wrap their vehicle with their brand name, logo and contact information to help with their advertising.
Whether you can do this to your lease vehicle will be specified in your lease contract, so please check that before you go ahead with your makeover. If your contract doesn’t specify, then check with your lease provider. Should you get the go ahead, here’s some top tips to follow: • Make sure your car isn’t freshly painted. During the curing process, fresh paint can release gasses that will affect the wrap. • Check the warranty period for wrap. While it may seem cheaper to leave a wrap on, the adhesive may change and cause damage to the lease car – costing you more in the long run. • When removing the wrap, ensure this is done professionally to avoid damaging the vehicle.
Whether you can do this to your lease vehicle will be specified in your lease contract, so please check that before you go ahead with your makeover. If your contract doesn’t specify, then check with your lease provider. Should you get the go ahead, here’s some top tips to follow: • Make sure your car isn’t freshly painted. During the curing process, fresh paint can release gasses that will affect the wrap. • Check the warranty period for wrap. While it may seem cheaper to leave a wrap on, the adhesive may change and cause damage to the lease car – costing you more in the long run. • When removing the wrap, ensure this is done professionally to avoid damaging the vehicle.
Business car leasing and tax
Do I have to pay corporation tax for a business car lease?
Business car leasing deals can often come with extra cost savers like reduced tax bills. Depending on your circumstances, you may be entitled to 100% corporation tax relief.
Our guide to company car tax contains more information, though you should always seek professional guidance on tax and financial related matters.
Our guide to company car tax contains more information, though you should always seek professional guidance on tax and financial related matters.
Do I have to pay VAT on a business car lease?
You may also be able to make further savings by reclaiming the VAT paid during your lease, if you are a VAT-registered business.
Depending on your circumstances, you may be able to claim 100% of the VAT back is you use the vehicle purely for commercial purposes. If you also use the car as a private vehicle, you may be able to reclaim at least 50% of the VAT. Again, seek professional guidance.
Depending on your circumstances, you may be able to claim 100% of the VAT back is you use the vehicle purely for commercial purposes. If you also use the car as a private vehicle, you may be able to reclaim at least 50% of the VAT. Again, seek professional guidance.
Do I have to pay National Insurance on a business car lease?
If you offer employees a company car as a benefit in kind, then you will most likely have to pay Class 1A National Insurance.
Your employees probably won’t have to pay National Insurance, but they will likely have to pay income tax as it is a benefit in kind. Employees will normally pay tax at their top rate.
Your employees probably won’t have to pay National Insurance, but they will likely have to pay income tax as it is a benefit in kind. Employees will normally pay tax at their top rate.
Business car leasing FAQs
Can I extend my business car leasing contract?
Business car leasing contracts are all different, though many make it easy for you to renew your contact once it ends. You may be able to negotiate a lower price, given that the cars will be older and so have devaluated. You’ll have to check the details of your contract for confirmation.
Is business car leasing cheaper than personal?
Whether business or personal car leasing best suits your situation.
Personal contract hire tends to cost more monthly, but you won’t have to pay company car tax. If you don’t use your car for business often, you might be better off with a PCH and claiming the business mileage. VAT-registered businesses may benefit from claiming back the VAT, and as the financial commitment to a leased vehicle is off the balance sheets, it can prove beneficial. It’s really a case of what suits you.
Personal contract hire tends to cost more monthly, but you won’t have to pay company car tax. If you don’t use your car for business often, you might be better off with a PCH and claiming the business mileage. VAT-registered businesses may benefit from claiming back the VAT, and as the financial commitment to a leased vehicle is off the balance sheets, it can prove beneficial. It’s really a case of what suits you.
Can I lease a car from Auto Trader?
Auto Trader have partnered with a number of leading business car lease providers to bring you the best car leasing deals in one place.
Look for great leasing deals on brand new cars.
Look for great leasing deals on brand new cars.
Alternatives to business car leasing
Business car leasing isn’t for everyone.
For some, the prospect of not owning a car is a deal breaker. If you want to own your car, or fleet, but can’t afford to buy the vehicle(s) outright then there are other options available.
For some, the prospect of not owning a car is a deal breaker. If you want to own your car, or fleet, but can’t afford to buy the vehicle(s) outright then there are other options available.
Business Contract Purchase (BCP)
Business contract purchase (BCP) is similar to business contract hire (BCH). For the most part, you make fixed monthly payments that help cover the cost of depreciation.
You have multiple options at the end of a standard BCP contract: • You can return the vehicle(s) • You buy the vehicle(s) with a final balloon payment • You can part-exchange the vehicle(s) if they’re worth more than the guaranteed minimum future value.
You have multiple options at the end of a standard BCP contract: • You can return the vehicle(s) • You buy the vehicle(s) with a final balloon payment • You can part-exchange the vehicle(s) if they’re worth more than the guaranteed minimum future value.
Hire purchase (HP)
Hire purchase is slightly different. Instead of making monthly payments against depreciation, your HP monthly payments go towards paying off the cost of buying the car.
You won’t own the car until the HP lease has ended, but: • There aren’t any additional charges for excess mileage or vehicle damage, as there would be with leasing • You can plan your monthly outgoings in advance • The final payment tends to be smaller than with a BCP deal At the end of the HP agreements, you’ll be the registered owner of the vehicle. Learn more about Hire Purchase here.
You won’t own the car until the HP lease has ended, but: • There aren’t any additional charges for excess mileage or vehicle damage, as there would be with leasing • You can plan your monthly outgoings in advance • The final payment tends to be smaller than with a BCP deal At the end of the HP agreements, you’ll be the registered owner of the vehicle. Learn more about Hire Purchase here.
Lease purchase (LP)
Lease purchase agreements are similar to BCP, only there is no option to return the vehicle. Instead, you make a balloon payment and either keep the car or part-exchange it.
Generally, lease purchase agreements involve lower monthly payments than HP deals. LP contracts are flexible in length, normally lasting 24 to 60 months, though you can end them early by paying off any outstanding debts.
Generally, lease purchase agreements involve lower monthly payments than HP deals. LP contracts are flexible in length, normally lasting 24 to 60 months, though you can end them early by paying off any outstanding debts.