Business Car Leasing Explained
If you're considering opting out of a salary sacrifice scheme, searching for a new business vehicle for yourself, or you are looking to acquire cars or vans for a fleet solution for your company, Business Contract Hire leasing is an excellent option for its affordability and convenience.
We are specialists in fleet solutions, as we can source and deliver individual lease vehicles for smaller businesses or for large business lease fleets.
We can supply new or nearly-new cars or vans from any manufacturer, so whether you're a sole trader or you manage a whole fleet of vehicles, Fleet UK can provide the perfect solution for you.
Read on below to find out more about Business Contract Hire and the benefits it can bring your business.
What is Business Car Leasing?
Business contract hire (BCH) is a sought-after long-term vehicle rental agreement suitable for sole traders, partnerships and limited companies. The vehicle is simply rented over a number a set number of years (typically 2 to 4 years) for affordable and fixed monthly payments.
At the end of the contract, the vehicle is returned to the financial provider, freeing your business from the hassle of trying to sell the vehicle at a heavily reduced rate.
The concept of Business Contract Hire with Fleet UK is simple:
• Choose a new or nearly-new vehicle that is suitable for your business – car, van, pickup, etc
• You can add functional options to a brand new vehicle
• Fleet UK orders that vehicle through a franchised dealership, either using their existing stock or putting a build order into their factory
• A Finance Provider (a.k.a. Funder) then purchases that vehicle
• You are then in agreement with the Financial Provider that your business will rent your chosen vehicle from them, paying them a pre-agreed fixed payment each month for the duration of the contract
• The finance provider then collects the vehicle at the end of your contract hire term, and you get to choose a brand new car or van again
Benefits of Business Contract Hire?
• Vehicle tax is provided during the term of the contract
• Manufacturer’s Warranty is included
• Breakdown cover is included
• Free delivery of the vehicle to anywhere in mainland UK
• Fixed monthly rental payments cover the hire of the vehicle
Monthly hire payments are calculated based on the following:
• The cost of the vehicle
• The length of the contract period
• The anticipated residual value of the vehicle (how much it will be worth at the end of the contract)
• The agreed mileage allowance you chose at the start of the contract
Who is eligible for Business Contract Hire?
• Limited companies or a Limited Liability Partnership (LLP)
• A partnership
• A VAT Registered business
• A PLC
• A charity
• A local authority
• Central government
• An embassy
Applying for business car lease finance
Applying for finance as a business is slightly different from the personal lease process as there are different requirements that need to be met.
Every funder has its own requirements for business applications. Generally, you need to have been trading for two years and filed at least one set of accounts showing a positive net worth.
If no accounts have been filed and you are a new start company, some funders such as (but not limited to) Audi, Volkswagen, Skoda, Seat and, Mercedes will still accept an application with a supporting Directors personal guarantee.
If a company has filed only one set of accounts, Fleet UK recommends supplying the latest management accounts and three months business bank statements to support the application.
Sole Traders - Finance Applications
Sole Trader finance applications work slightly differently as the funder will carry out a personal credit check, which strictly speaking is the same if someone was making a personal application.
There are many benefits to leasing a vehicle as opposed to buying one for sole traders. The affordable and fixed monthly payments make it easier for you to budget and manage your cash flow.
You get to decide the length of the contract and the annual mileage which suits your requirements. You can decide if you want to pay an initial deposit amount or a larger one to reduce the following monthly payments.Apply for finance
What is included in a business car lease?
A business car leasing deal includes road tax, the manufacturer’s warranty, and free UK delivery to your door.
You can add maintenance packages to your contract for an additional fee. This provides coverage as well as giving you peace of mind on minor damage, servicing, minor dents, or scuff.
Also, roadside assistance cover is provided by the car manufacturer for a period between 12 months to 4 years, depending on the vehicle brand.
Company car vs car allowance
More employers are offering employees the choice between a company car and a car allowance, which is paid into your salary and yours to spend how you see fit.
It’s wise to take some time to decide which is the best option for you, but if you choose to use the money for a lease car, you need to sign up for a personal contract hire deal, not a business one.
You will not have to pay Benefit In Kind on the vehicle as you would do with a company car, but you will have to pay VAT.
Advantages of Business Contract Hire
Disadvantages of Business Leasing
• Early termination can be expensive
• If you do more miles than stated in your contract you will be charged excess mileage for each mile over that stated in your contract. Please visit our ‘Excess mileage charge guide’ for more information.
• You must look after the vehicle and return it in a well-maintained condition otherwise you will be charged for any damage over and above the BVRLA’s Fair Wear and Tear Guide. Please see our ‘End of Contract’ guide for more information.
• You must have fully comprehensive vehicle insurance
• You will never own the vehicle as there is no option to buy it
Are there tax benefits with using Business Contract Hire?
Please visit our 'Business Car Leasing Tax Advantage' guide for information such as:
Does Business Contract Hire help your company accounts
- Is leasing a vehicle tax deductible?
- VAT and Business Contract Hire
What happens at the end of the contract?
At the end of the contract, the vehicle is handed to BCA Limited (British Car Auctions Limited) which means you’re free to lease another new vehicle without any outstanding financial obligation.
If you have exceeded the agreed annual mileage allowance there will be an excess mileage charge applied, which is typically worked out at a ‘pence-per-mile’ basis. Also, when returning your vehicle, it will be assessed by the BCA who will use the BVRLA’s Fair Wear and Tear guidelines. Damage which falls outside of these guidelines may be subject to penalty charges.
For more detailed information as to what happens at the end of the contract, please visit our 'End of Contract' guide.
How do I get started?
Why choose Fleet UK?
At Fleet UK, we’re specialists in supplying new or nearly-new vehicles for reasonable rates. Whether you’re a sole trader or a big business looking for a fleet of vehicles, we’ll provide you with a dedicated account manager who will find the right solution for you.
If you have any questions, please call us on 02392 245570 and we will be pleased to assist you.