A guide to business car leasing

01/06/2021

A guide to business car leasing

If you are thinking about leasing a vehicle for your business, then this guide to business car leasing will help answer questions.

Car leasing is growing quickly in popularity in the UK and for many people, including businesses, it's an effective way to get behind the wheel of a brand-new car.

Indeed, the British Vehicle Renting and Leasing Association (BVRLA) estimate that the business car leasing market in the UK is growing every year by around 7.6%.

However, you will not own the car, and when the leasing agreement ends, you will not be allowed to buy it.

Business car leasing is also known as business contract hire, or BCH, and this guide explains more.

 

What is business car leasing?

The first thing to consider is what business car leasing is.

It runs along similar lines to personal car leasing, or personal contract hire (PCH).

The big difference is that rather than leasing a new vehicle for your personal use, you are leasing a vehicle with a business lease on behalf of your business.

And while a business will have sole use of the leased car for the duration of their agreement, they will never own it. It will not become the property of the business or an asset.

It will always be the property of the business car leasing company.

So, why consider business car leasing?

The simple answer is that business contract hire deals give firms the chance to reduce the financial risks that may come when owning a car.

Leasing also gives businesses access to the newest, high specification models - there's no need to deal with battered, second-hand cars.

And since cars lose a huge amount in depreciation, in some cases by to 40% over three years, means this depreciation can be an expense a business doesn't need.

Essentially, a business lease will remove the risk of how much the vehicle will lose in value, which is a positive for anybody who's wondering whether they should buy or lease a business car.

 

Who can lease a business car?

There are limits to the firms who can take out a business car leasing deal, or a business contract hire agreement, and you'll need to meet some criteria. These will include:

  • Your business must be registered as either a public limited or a limited company
  • You will need to provide bank statements
  • Confirm the ID of the firm’s directors
  • Provide proof of address.

How does a business car leasing deal work?

Business car leasing is a straightforward process. You will need to:

  • Decide on the type and make of car you want to lease
  • Choose the fuel type: petrol, diesel or electric
  • Choose the mileage limit
  • Decide how long you want the business contract hire agreement will run for
  • How much you will pay as an initial rental.

With Tilsun Leasing, the initial rental amount is either one month, three, six or nine months.

This initial rental will be whatever the car’s leasing monthly payment deal is, because the more you pay as an initial payment, the lower your monthly payments will be subsequently.

The leasing term for a business car is either two, three or four years.

The mileage limits start at 5,000 miles with Tilsun Leasing and rise to 30,000 miles.

While running a business car lease, the driver will need to stay underneath the mileage agreement or risk paying excess mileage charges.

And any serious damage will need to be paid for - the leasing company appreciates that cars will have fair wear and tear.

 

Business car leasing deals and tax

One of the big attractions for a business to undertake a contract hire agreement is that they can reclaim some of the tax.

The monthly instalments can be claimed as a business expense, along with fuel and road tax.

If the car is used solely for business purposes, then the firm can reclaim 100% of the VAT.

However, if the business car is being used in a personal capacity, even if it's just a few miles every year, the firm can reclaim 50% of the VAT.

Should the business sign up for a maintenance package - this will see the routine services being paid for, along with tyres, batteries, then 100% of the VAT can be claimed.

The rules mean you cannot claim the company car tax but the tax on electric company cars is very low.

The benefits of business car leasing explained

There are many benefits to leasing a business car, and here we offer a roundup.

  • Monthly payments: The monthly payments for a business car lease will be fixed which helps with cash flow
  • Minimal capital expenditure: For a business wanting to enjoy new vehicles, there's minimal capital expenditure with a low initial outlay and monthly rental
  • No depreciation: Cars can lose 40% of their value in the first three years of being driven, but this is not a risk for the business, but for the finance company
  • Brand-new cars: A business car lease will see a brand-new car being delivered with the latest safety equipment and high specification
  • VAT: For business use, 100% of the VAT is recoverable, with some private usage, 50% of the VAT can be recovered
  • Manufacturer’s warranty: Your brand-new car will still have the manufacturer’s warranty to bring peace of mind should anything electrical or mechanical go wrong.

 

The downsides of business car leasing

Having explained the positives, there are some drawbacks when leasing a car for business. They include:

  • Ownership: You do not own the car, so it's not an asset and you cannot sell it
  • Modified: You cannot modify a vehicle for business purposes
  • Mileage: You might think you are saving money by choosing a low mileage, but you risk excess mileage charges for any amount above the agreed miles
  • Damage: You need to look after your business car because any serious damage, above fair wear and tear will need to be paid for.

 

Where do I sign up for a business car leasing deal?

There's a friendly team of experts at Tilsun Leasing who can explain the pros and cons of business car leasing deals. You can contact them today on 03330 040 888.

Back to blog

BVRLA
ogilvie
Hitachi
Lex Autolease
Alphabet
ALD
AEVAL
Leasing Broker Federation

Join our Newsletter

Join our newsletter to receive our latest offers & news

First Vehicle Leasing Limited is a credit broker not a lender. First Vehicle Leasing Limited is authorised and regulated by the Financial Conduct Authority. FRN: 670872.

All our calls are monitored for compliance and training purposes.

Address England: First Vehicle Leasing Ltd, Verity Court, Pochin Way, Middlewich, Cheshire, CW10 0GW.

Address Scotland: First Vehicle Leasing Ltd, Enterprise House, Drumpellier Business Park, Glasgow Rd, Coatbridge ML5 1EL

Company Registered in England and Wales No. 4393228 | Data Protection No. Z7014603 | VAT Reg No. 400 8928 64

First Vehicle Leasing 2024. All Rights Reserved