We're here to tell you why a business car lease is so much better than buying a business car outright.
Of course, being a car lease comparison site, we would say that, wouldn't we?
But wait, hear us out . . .
There are some objective, real-life reasons for why it works out better.
What is Leasing?
We all know about buying – you pay for a vehicle upfront and it's yours. No mysteries there.
But what about this exotic thing called leasing?
Well, not so exotic at all actually.
If you lease, say, a property, you take a lend of it, and it's the same with car leasing. Just think of it as a longer (and in proportion cheaper) form of renting a car.
You usually pay a deposit or upfront fee (although we do have plenty of no deposit deals which don't require that!), and you then pay fixed monthly payments for an agreed amount of money across an agreed amount of time.
How Does That Differ From PCP/Hire Purchase?
Well, unlike those methods of finance, you don't have the option to buy the vehicle at the end of the contract. Instead, you simply hand it back to the leasing company at the end of the business lease contract.
Which is a good thing, as it means you won't be paying any interest. And that's one of the reasons why the monthly payments on average tend to work out cheaper than with PCP/Hire Purchase - which, oh yeah, is the other big difference!
What is the Difference Between Business Leasing and Personal Leasing?
Pretty simple, really.
A personal lease is taken out by you as an individual person, whereas a business lease (also known as a business contract hire) is taken out in the name of your company.
Why is a Business Car Lease Cheaper Than a Personal One?
Business car leasing tends to be cheaper than personal car leasing because personal lease deals always include VAT within the cost, whereas if you are using a company car completely for business use, you can claim back the entire 100% of the VAT - saving you a hefty amount of buck.
Or up to 50% of the VAT if you are also using the company car for some personal use, which is still a big figure.
Can I Take Out a Business Lease?
Sure can.
You will be asked to provide proof of your business, so things like bank statements, accounts, proof of ID, address, etc.
Similar to personal leasing, with business leasing you will also need to pass a credit check and be approved by the finance company responsible for funding the deal. They need to be sure that you'll be able to afford and keep up with the payments.
Because of that, it's best for your business to have some financial history in order to be accepted. So if your business is fairly new, it may be a bit more of a challenge to get approved - but still very much a winnable challenge. You may just be asked for more information, such as a director's guarantee.
Pros and Cons of Leasing a Business Vehicle
✔️ Minimal upfront costs compared to buying a vehicle outright
✔️ Fixed monthly payments that don't change throughout the lease
✔️ Road tax and the full manufacturer's warranty included
✔️ Lets you switch to a new vehicle every so often, taking advantage of the latest models and technology
✔️ No hassle of having to sell the vehicle on
❌No option to buy at the end
❌ Credit checks mean small chance of not being accepted for the lease
Pros and Cons of Buying a Business Vehicle
✔️ There might be a large initial investment, but depending on the price and your financial situation, owning outright can potentially result in cost savings over the course of the vehicle's lifespan
✔️ No mileage limit
✔️ No credit check
✔️ Ownership of the vehicle can build equity for your business, which can be leveraged for future as an asset on your balance sheet
❌ Big upfront payment
❌Hassle of having to sell the vehicle on
❌ Road tax typically not included
Summary
Making the choice between between leasing and buying a business car is a decision that requires a complete analysis of every factor: financial, operational, and strategic. Ultimately, leasing one from a leasing company gives you that initial lower cost, convenience, and tax benefits, without you having to commit to owning the vehicle, which is a weight off your shoulders.
Stay tuned to our blog/feed for more insightful articles on car finance, business leasing, and managing your payments!
And of course, check out all of our business car lease deals today for your next company car.
FAQs
Is it cheaper to lease a car through a business?
Yes, business leasing oftentimes works out cheaper than personal leasing as the monthly payments don't include VAT. Drivers who use the car exclusively for business use can claim up to 100% of the VAT back – or up to 50% if the car is also used for private use.
Why do companies lease rather than buy cars?
Many companies choose to lease rather than buy cars as it's usually a more cost-effective alternative to buying outright, particularly if funds are tight. With leasing, you make fixed monthly payments that don't change. So could be the wise move for your business as well.