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.
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).
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
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.
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
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.
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.
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.
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.
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.
Our guide to company car tax contains more information, though you should always seek professional guidance on tax and financial related matters.
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.
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.
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.
Look for great leasing deals on brand new cars.
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.
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 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.
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.