Business car leasing, also known as business contract hire (BCH), is a great way for your company to lease a vehicle for a set period. If you’ve been considering leasing a company car, you may wonder what the benefits and drawbacks are. Luckily for you, we’re here to explore all things business car leasing, including how it works, how you can apply and much more!
What Is Business Car leasing?
Business car leasing is a great way for businesses to get their hands on the latest models of cars without having to buy them outright. Instead of investing a large lump sum of money into purchasing vehicles, you can opt for a leasing contract that allows you to use the vehicle for an agreed period and then return it at the end of your contract. This is a great way for businesses to keep their costs down, as you pay off the cost of the vehicle in monthly payments to the leasing company.
How Does Business Car Leasing Work?
A business car lease contract is an agreement between the leasing company and the individual renting the car. Within this agreement, the individual agrees to fixed monthly payments for a set duration until the contract ends. Unlike purchasing a vehicle outright, you do not own the car and are usually unable to buy it at the end of the contract.
Payments:
There is usually an initial deposit to lease the car, which contributes to the overall cost. This is far less than a typical car deposit, as you’re paying for the lease as opposed to the full value of the vehicle. Following this, there are fixed monthly payments.
Insurance and Tax:
For most business lease deals, insurance and car maintenance packages are not included but are available for individual purchase. However, your business car lease deal often includes road tax contributions. Many options are often available if you work for a larger company and require a fleet, so it is important to chat with a customer service advisor.
End of Contract:
When the contract’s duration ends, you return the vehicle to the leasing company. From here, it will be inspected for damage, and the mileage will be checked. If there is damage to the car, you may be required to pay excess on repairs.
The Future:
If you are happy with your business car leasing deals, you may want to opt into a business lease again! After your previous contract ends, you are free to lease another brand-new car!
How To Get A Business Car Lease:
If you’re an employee of one of these and your company offers a company car scheme, you’re likely eligible for a business contract hire car. To confirm, speak directly with your employer about the benefits that your company offers.
However, if you’re looking for a business lease car for your own company, here are some simple steps you should follow:
1- Find Lease Deals
The first step to acquiring a business car lease deal is to find one! Many car leasing sites offer a range of great deals. Alternatively, you can visit a broker’s site directly.
2- Request a Quote
Most car leasing companies will have a section where you can request a direct quote on their site. Request a quote and wait for the results.
3- Provide The Necessary Documents
Documents such as company address, registration, bank statements, and annual income will need to be provided. These help the car lease company decide whether or not they will approve your application and if you can afford to pay the fixed monthly costs of the car.
4- Confirm The Business Car Lease
A customer advisor will then go over the total cost of your car lease and explain the service in-depth. Car leasing companies are not a lender, they will require all monthly payments to be made on time, or the business lease agreement will stop. From there, you can wait for your new car to arrive!
Am I Eligible For A Business Contract Hire Agreement?
A business car leasing contract is aimed at the following:
- A Sole trader: Provided you have a bank account in the sole trading name
- A Partnership: 2 or more partners must work in the business
- A limited Company, Private Limited Companies (PLCs) and Limited Liability Partnerships
- VAT Registered companies.
Is Business Leasing Cheaper Than Personal?
Business car leasing deals are often cheaper than personal car leasing, so they can be a great way to have a company car and save money. This is because you can claim 100% of the VAT back if you do not use it for personal travel.
Are Electric Vehicles Available On Business Lease?
Yes! You can access various types of cars through business car lease deals, including electric vehicles!
Here at Fleet Evolution, we specialise in offering electric vehicles as company cars via a Salary Sacrifice Scheme. Not only do these offer a range of tax benefits and savings, but they’re also zero emissions, so you can do your part in helping the environment. To join the electric revolution, get in contact with one of our customer service professionals today!
The Advantages Of Business Car Leasing:
Here are the various advantages of business car leasing:
1. Flexible Contracts:
With car leasing, you’re not stuck with the same vehicle for a long period of time. You can choose how often you want to upgrade and when.
2. Lower Costs:
Leasing cars instead of buying them outright allows businesses to spread out the cost of the vehicle over a longer period of time. This means that businesses can keep their costs down and have access to the latest models of cars without having to pay all at once. They can also be written off as a business expense which can help save considerable amounts on tax and VAT.
3. Tax Benefits:
Business car leasing often comes with attractive tax benefits, which can help businesses save money in the long run.
The Disadvantages Of Business Car Leasing:
Here are a few of the potential disadvantages you should consider:
1. Early Termination Fees:
One of the drawbacks of business car leasing is that you may have to pay an early termination fee if you decide to terminate your contract before its due date.
2. No Ownership:
When you lease a vehicle, it doesn’t belong to you, so when the contract ends, you will have to give the car back. Businesses don’t get to keep the vehicle once the agreement is over and so may not benefit from any future resale value.
3. Limited Choice:
When it comes to leasing cars, you are limited to what models of cars are available on lease terms. This can make it more difficult to find the exact vehicle you’re looking for.
Business car leasing can be a great way to access the latest models of cars while keeping costs down and benefitting from attractive tax advantages. We’ve outlined the process of getting a business car lease and the various advantages and disadvantages which come with it. If you want a business car, have car leasing explained in depth before signing any contracts and have all the necessary documents ready for submission. Good luck!
Business Car Leasing FAQs:
We’ve done our best to try and answer some of the most common questions about business car leasing below:
Can I Still Lease A Car If I'm Self-Employed?
You can get a Business Car Lease if you’re self-employed, e.g. a sole trader. However, there are some scenarios where personal leasing may be your best option. A personal lease would allow you to do extra mileage that isn’t classed as business miles.
What Is Company Car Tax?
Company car tax, also known as a benefit in kind (BIK), means that you’re taxed adequately for a benefit that falls outside of your current income and national insurance tax contributions. To pay company car tax, you must inform HMRC of your vehicle’s price, emissions and whether it is electric. If you have an electric vehicle, company car tax is considerably lower at 2%, so this is a great incentive to make the switch!
For more information, why not read are helpful all in one guide for Tax On Company Cars.
What Business Credit Score Do You Need To Lease A Car?
You must have a credit score of at least 700 to lease a car. This will give you the highest chance of being approved for a business lease.
Is Business Car Leasing a Good Idea?
Yes! Business car leasing allows you to save on costs, receive tax benefits and have access to a brand-new vehicle every few years!
Can You Lease A Car Through Any Business?
Not all businesses can lease cars to their employees. A business must demonstrate a suitable profit level and provide a credit check to be able to lease a car.