How Does Business Car Leasing Work?
Business car leasing is a popular choice for businesses that have a need for several vehicles for their business and is ideal for companies that need access to new vehicles quickly for a fixed period of time.
In this guide, we’ll cover what business car leasing is, who it’s for and how it works to paint you the full picture on business car leasing before you make any decisions.
What is Business Car Leasing?
Business car leasing or business contract hire is a great way for businesses to have access to a car without the financial burden or hassle of owning it. Leasing a vehicle allows for having the car for a couple of months or however long it's required for and returning it once the lease is up.
What’s the Difference Between Business Car Leasing and Personal Car Leasing?
Business car leasing is a more business-friendly version of car leasing. The difference between business car leasing and personal car leasing is that with a business lease, the car is leased under the name of the business instead of under the customer's name for personal use.
Who Can Take Out a Business Car Lease?
Sadly, not just anyone can take out a business car lease. To qualify for a business lease, at least one of the following requirements must be met:
- A Limited Company or Private Limited Company (PLC)
- A sole trader
- A VAT-registered company
- A partnership
How Does Business Car Leasing Work?
When you take out a business car lease, you won’t own the car and won’t be able to purchase it. The payments of a business lease involve covering the amount of money that the car is expected to depreciate over the length of time the car is leased for. This depreciation value is dependent on various factors such as the car model, the length of the lease term and the agreed mileage limit.
The total cost of leasing a business car is built up of different costs:
- An initial rental cost
- Monthly payment costs based on estimated depreciation
- Road tax
After your business lease term is up, you’ll need to return it back to the leasing company. For deeper information on what happens at the end of a car lease, you can read our helpful article.
The Benefits of Business Car Leasing
1. Reclaim Costs Through Corporation Tax
Limited companies are able to offset the payments and VAT of business lease cars against their corporation tax. Maintenance packages can also be claimed.
However, when you opt for a business car lease, you agree to a particular mileage allowance and if this mileage is exceeded the leasing company will need to be paid an excess mileage charge.
2. Fixed Payments
Business leasing is paid for with fixed monthly payments which help with cash flow, finances and knowing exactly what the fixed payments are going to be.
3. Often Cheaper Than Personal Leasing
A business lease deal is often a cheaper option than a personal lease due to the VAT breaks available for businesses.
4. Saves Spending Money on a Depreciating Vehicle
Having to pay for a car upfront can be difficult for a lot of businesses and can be quite frustrating that any car bought will typically never be worth what was paid for it.
When you pay monthly payments for a business car lease, the monthly payments factor in the deprecation of the vehicle for the full lease term.
5. Better Cash Flow
Buying cars for business use can be an expensive investment. With leasing, you can pay smaller monthly payments to hire vehicles and be free to invest more money into the business.
6. Drive Brand New Cars
Opting for business leasing allows your business and staff to benefit from the fuel efficiency and modern look of a new car. Having a newer, more fuel-efficient car saves money in the long run
The Disadvantages of Business Car Leasing
1. You Can’t Sell the Car
Leasing the car means that you won’t be able to sell it after the lease term, like you would be free to do after financing or buying a car.
2. Complications Around Cancelling
If for any reason you need to end your lease early, there will come a fee with this. You’ll need to be sure your business will be able to commit to the monthly payments for the entire duration of the lease period.
3. Liable for Damage and Exceeding Mileage
As the car is essentially rented to you for a set period of time, you’ll be liable for any damage caused to the car. As well as this, if the car exceeds the agreed mileage limit at the start of the lease, then this will incur charges with the leasing company.
Business Car Leasing with Pendle Lease
If you’re looking for a business car lease, you’ve weighed up the pros and cons, and you meet the above criteria for business car leasing, take a look at our selection of business lease deals.
We have an extensive group of brands to meet your business lease deals such as BMW, Hyundai, and Jaguar, we’re confident we have an option to suit your business lease needs.