Leasing A Car For A New Business
It can be a bit overwhelming starting up your own business with a million things to think about. One stress being getting a vehicle for your business, especially as a new business with little credit history. A lot of people worry that their new company may not be able to get a car on finance.
One of the available finance options is car leasing for new businesses. There are plenty of benefits to leasing a car or van for your company, taking a lot of the hassle out of your hands. Although that said, if you are a new business then it will be a bit more difficult for you to get a lease.
We’ve made this guide to talk you through if you will be eligible for a business lease and some of the details of new business leasing.
Is My New Business Eligible For Business Leasing?
New business car and van leasing is usually aimed at the following businesses:
- Sole traders
- VAT registered companies
- Limited companies
- Private limited companies
- Partnerships
- Public limited companies
- Charities
So if your business falls into any of the above categories then you will be eligible for business leasing. There may also be other business types eligible, and for those our leasing partners will be able to advise you if you are eligible.
It is also worth noting that for the majority of lease companies (including the ones advertised on LeaseLoco), it is not permitted to use a lease car as a taxi or Uber vehicle as there are restrictions limiting how the lease vehicle can be used commercially. There will likely be companies that specialise in leasing for taxi or Uber usage, however our leasing partners don’t offer this service unfortunately.
Details & Documentation Requirements
If you are looking to take out a business lease, you will need to provide some details including proof of your business, including business bank details, accounts and proof of ID and address. Your company will need to undergo a few checks, including a credit check, as part of the application. This is because the finance company needs to be assured that you will be able to make the monthly payments. For this reason, car leasing for new businesses can be more challenging if they have no financial history.
If you are a new business (usually less than 2 years old), you may need to provide some additional information that will support your application. Finance companies often will require a number of business bank statements, accounts and potentially a director’s guarantee to show that you can pay the monthly payments. There may also be the requirement to pay a higher upfront payment, but this is only in some cases.
If you are a business with little financial history, getting a business lease deal will certainly improve your credit rating too for any future finance agreements.
Benefits Of Leasing For New Businesses
There is a reason why business leasing is one of the most popular options for new businesses, which is down the all the incredible benefits including:
Can claim back VAT on payments
You can claim 50% of the VAT back on the monthly lease payments if your car is used for both personal and business use. If the vehicle is solely used for business use then you can claim the entire 100% of the VAT back on these payments, saving a significant amount of money compared to personal leasing. You can also claim 100% of the VAT back on any maintenance costs during the lease.
No BIK charges for electric vehicles
There is a Benefit in Kind (BIK) tax charge for company cars to be paid. However, if you are leasing an electric vehicle then there will be no BIK charge to be paid, as the Government introduced this as a new tax rule to encourage drivers to go electric. This makes it an even more affordable option for company car drivers who will be going green with their car.
Better company accounts
If you bought a car, then you would have a depreciating asset on your books. However, car lease payments are actually great for your company accounts as they don’t appear as a liability or asset on a balance sheet. This is important for new businesses who may be looking for credit and investors, who will look at this to make a judgement of your business. So you may be giving your business more opportunities by managing your cash flow through the low monthly payments that appear ‘off balance’ sheet.
Flexibility of leasing
New businesses can get a lot more flexibility with their money by paying fixed low monthly payments, rather than a massive deposit to buy a car, freeing up their money to spend elsewhere. You will also save yourself a lot of time and hassle by choosing to lease as you don’t need to sell the car at the end of the term. You simply hand it back and get yourself another brand new car a few years later. The monthly payments will also include road tax, manufacturer’s warranty and breakdown cover in the cost, leaving you even less to organise yourself.
Want to know more about leasing a car for your business? Check out our hub of leasing guides that we are sure will answer some of your questions. If you’re ready to start your search for a great business lease deal, then head to our search page to compare the hottest car business deals. If you’re looking for a van then we have plenty of van lease deals for you to choose from for your new business!
FAQs
Can you lease a car through a new business?
Yes, you can lease a car if you are a new business or start-up, although you will need to provide additional information to show that you can afford the monthly payments. You may need to provide bank statements, company accounts, a director’s guarantee or pay a higher initial rental.
Is it better to lease a car through business?
This will depend on your circumstances. Business and personal leasing are both rather similar, that said, business leasing can be cheaper than personal leasing as you can claim back VAT on the monthly payments which can be a cost-effective way to lease a car.
Can I get a business car lease if self-employed?
Yes you can get a business lease if you’re self-employed, as you are essentially operating as a sole trader. You will still need to provide the appropriate documents and pass the credit checks to be approved for the finance.
How does a business lease work?
A business lease works almost the same as a personal lease does. The process is very similar, however it is your ‘business’ that will be the name on the agreement and that will be looked at to be approved for the finance. You will also be able to claim VAT back on the monthly payments through a business lease.