Last updated: 23/07/2020 | Estimated Reading Time: 3 minutes
Business car leasing guide
Leasing vehicles for your business is a great way to reduce upfront costs for your company. It is suitable for a variety of company setups, whether you are a sole trader or a limited company. Leasing is an alternative method of financing your vehicles and is often cheaper and more beneficial than a loan. Our comprehensive guide has everything you need to know in one place, helping you to make an informed choice for your business.
In This Guide:
- The benefits of business vehicle leasing
- Disadvantages of business vehicle leasing
- How to lease a vehicle for your business
The benefits of business vehicle leasing
There are many benefits of leasing vehicles for your business, from VAT benefits to minimal repair bills. Here is what you can benefit from business vehicle leasing:
- VAT benefits. If your company is VAT registered you could claim 100% of the VAT if the vehicle is solely for business use. If you also use it privately then you can still claim up to 50%.
- Fixed monthly fee. You know how much you will be charged each month which gives you and your business piece of mind.
- No need to worry about the decrease in vehicle value as you simply hand back your fleet at the end of your contract.
- Minimal capital expenditure. Low monthly rental bills and low upfront costs keep your business capital expenditure affordable.
- As the majority of leased vehicles are brand new they will be under the manufacturer's warranty, so you don’t need to worry about any costly repair bills.
Disadvantages of business vehicle leasing
As with every financial option there are always disadvantages. It is important to make sure you are aware of them and how they may affect your business in the future.
- All vehicle leases are covered by a 'fair wear and tear guide’. If you or your employees are reckless with the vehicles, it could result in your business being hit with a damage bill when you return your vehicles. The vehicles will be checked thoroughly so make sure anyone driving is aware of this.
- If you need to terminate the contract early it will be expensive. You need to be sure that you can afford the monthly payments and that it’s worth the risk for your business.
- All vehicles leased are supplied with a pre-agreed mileage. If your vehicle goes over this you will get charged for each mile you drive. This can end up being very expensive, so make sure you try to predict your mileage accurately before signing the contract.
How to lease a vehicle for your business
First of all, you need to check if your company is eligible for business vehicle leasing. To do this you will need to find a finance company to complete a credit check. As always, make sure you compare car finance deals to find the best offer for you.
Collect all the information ready for your credit check to ensure a quick transition. The main information you will need to collect is:
- Business details - including name, address, company registration number, annual turnover and bank details.
- Director details - including name, address and marital status.
In some cases you may also need:
- A business directors guarantee
- 3 months of business accounts
- Management accounts
Finance companies may need this additional information if your business is less than a year old or you have bad credit or previous issues getting vehicle finance.
After you have supplied all the information they need the credit check will commence. It usually takes between 2-5 working days. If you are accepted for finance, you will be provided with the documents you need to start your new business venture.