Business Car Leasing

Business car leasing differs from personal leasing in a number of ways:

• Business car lease deals won’t advertise with VAT included because you can claim up to 50% off of the monthly payments, often making it the cheaper option. You can also claim up to 100% off of any VAT on any maintenance package added to your lease vehicle.
• If you’re a limited company, sole trader, LLP or partnership, you could be eligible for business leasing, whereas personal leasing is primarily for private individuals.
• Using a car on a business lease agreement for private journeys will result in you needing to record this mileage as it won’t be exempt from VAT charges. This differs from a personal lease car, which you can use for work and private purposes while still receiving a flat rate of VAT.

Yes, if you’re a sole trader you can lease a car through a business lease deal.

There are some requirements before you do, however. For example, a finance provider will often require you to have at least three months’ worth of bank statements to prove that you can afford the monthly payments for the car.

Should your business be very young, you may be able to provide other details and/or documentation that helps the application process. If you’re the director of a company and have good to excellent credit, a director’s guarantee to say that you’ll pay the monthly rentals if the business has to default can mean that you get approved for a business lease.

The amount of company car tax you pay on a lease car for your business will depend on a number of factors, which include:

A company car is a perk that an employer can offer employees to use on the job and/or for private journeys. If you drive a lot of miles for work, it’s a great option to cut motoring costs as the vehicle will be paid for and maintained by your employer. You’ll have a fixed monthly tax bill deducted from your salary as a contribution.

On the other hand, car allowance is a cash sum that employers can add onto employees’ earnings so that they can afford to buy or lease a car.

Car allowance tends to be less common than a company car, though it offers more flexibility as you can pick and choose what type of car to get with the money. A company car will be less flexible as the employer will choose the type of vehicle.

It’s the responsibility of the individual or company named on the finance documents to arrange fully comprehensive insurance for a business lease car. Once you’ve got a delivery date and the registration number of your lease car, it’s good practice to arrange insurance for the car to start on the date the car is delivered.

The only exception to this is if the business lease agreement is advertised as having insurance included within the monthly payments. This is usually known as ‘total care’ or something similar and in this case you won’t need to go through the process of purchasing insurance for your lease car. It will already be insured at the point that it’s delivered to you.