► No large upfront payment necessary
► Doesn't appear on your business accounts
► Able to reclaim VAT
Same as if you were on the hunt for your own personal vehicle, it helps to avoid actually paying for a business car upfront and having to stomach the cost of a depreciating asset. Then, for the final sucker punch, having to go through the hassle of selling the car on further down the line.
Well good news folks. With business leasing, it’s the leasing company who stomachs the depreciation cost, not you. And it’s them who have to deal with the vehicle's future and "sell" it on, not you. (Your business technically won't have the burden of actually owning the car, so you wouldn't be able to sell it anyway.)
That's 2 big advantages right there. But business car leasing has some other things going for it as well that you might like.
Perks Included With Business Car Leasing
✅ Road tax
✅ Full manufacturer's warranty
✅ Breakdown cover
As for servicing and maintenance, whilst they may not automatically be included in your lease contract, our leasing partners will be happy to quote you for this if it's something they can add to your agreement. Remember though, there will already be a lot that's covered by your lease car warranty.
Why is Business Car Leasing Cheaper Than Buying a Business Car?
As we all know, new cars drop in value over time (vehicle depreciation), which is one of the biggest costs of ownership.
And it's not a trickle kind of drop either. New cars lose value FAST . . . in fact, up to 40% of their value as soon as you drive them off the forecourt.
With business car leasing, you're not taking the brunt of that massive financial cliff drop.
You're also not putting down a massive sum of £££ upfront just to get behind the wheel of the vehicle. All you need is a small sum for the initial rental, which can be as little as 1 month’s worth upfront payment. That means more cash flow and working capital for your business to use elsewhere.
And as the business lease car is brand new, you're likely not going to have to spend anything on repairs, meaning less £££ you have to spend on repair costs. As opposed to buying a used car that's been run into the ground and getting it back up to speed.
Business car leasing also tends to be cheaper than buying outright due to the VAT and tax benefits. If you use the car for business use only, you'll be able to reclaim 100% of the VAT, or 50% of the VAT if you use the car for both business and personal use.
Find out more about the tax benefits of business car leasing
Can I Take Out a Business Lease?
As long as you can provide some proof (e.g. bank statements, proof of ID, address etc.) and come under one of the following categories, you're good to go:
- Limited Company (Ltd.)
- Public Limited Company (PLC)
- Partnership
- Limited Liability Partnership
- Charity
- VAT-registered and non-VAT-registered company
- Self-employed/sole trader (Learn more)
Similar to personal car leasing, with business car leasing you also need to pass a credit check and be approved by the finance company responsible for funding the deal.
Maybe you're a new company with none or not a lot of trading history? Then not to worry, you've still got a good chance of being accepted for a business lease. You may just have to provide a little more information, such as a director's guarantee.
Find out more about car leasing if you're a new business
Benefits of Leasing a Business Car
✔️ Minimal upfront costs, freeing up funds elsewhere
✔️ Fixed monthly lease payments
✔️ Business car lease payments will appear 'off-balance sheet'
✔️ Road tax, manufacturer's warranty and breakdown cover all included
✔️ Tax-deductible expense (you can reclaim 100% of the VAT if you use the car for business use only, or 50% if you use the vehicle for both business and personal use)
✔️ No large down payment (not everyone has access to a large sum of cash to pay for a car upfront)
✔️ Brand new car with access to the latest tech
✔️ No vehicle depreciation worries
✔️ Easy turnover and no hassle of selling the vehicle on
Find out more about the benefits of business car leasing
Disadvantages of Buying a Business Car
❌ Requires access to a large upfront payment
❌ Will appear as a liability on your business accounts
❌ Fast-depreciating vehicle
❌ Not always able to reclaim VAT
❌Hassle of selling the car on in the future
❌ 'Extras' typically not included (road tax, breakdown cover, etc.)
What is the Difference Between Business Leasing and Personal Leasing?
In a nutshell . . . a business lease is for businesses and a personal lease is for individuals.
Both work more or less the same way though. You pay fixed monthly payments in order to lease or rent a car for a certain period of time (usually 1 to 4 years), either with or without a large upfront payment at the start.
The only other major difference between personal and business leasing is that it will be your own personal name that goes down onto a personal lease contract, whereas it will be the name of your business on a business car lease contract.
Like with personal leasing, you pay a series of fixed monthly payments, with or without a large optional upfront payment (initial rental) at the start of your lease. And then, bingo, you simply return the car at the end of the lease.
Find out more about the differences between business and personal car leasing
Summary
Choosing between leasing and buying a business car is no small decision, so definitely one worth pondering over. Ultimately though, leasing gives you the benefit of a lower initial cost, tax benefits, fixed monthly payments and quick 'get in and go' convenience, without you having to commit to owning a vehicle.
Interested? Check out our business car lease deals today for your next company car.
FAQs
Is it better to lease or buy a car through a business?
Yes, business leasing can often work out cheaper than personal leasing due to the monthly payments not including VAT. If you use the car exclusively for business use, you can claim up to 100% of the VAT back – or up to 50% if the car if you only use the car for both business and personal use.
Can my business lease a second-hand car?
Used cars are gradually making their way into the leasing market, but most lease cars are still brand new – which is still one of the main selling points of leasing. For example, all of the deals displayed on LeaseLoco are for new cars.