How do you qualify for a business car lease?

25th Jun 2021

How do you qualify for a business car lease?

Company cars are just one of many fringe benefits you can offer your employees. They may help to increase employee retention, improve morale and even advertise the business.

Business contract hire is an affordable option for those who want to reward their staff. If you’re VAT registered, you can claim back 50% of the monthly payments and 100% of the maintenance costs.

But there are also options for self-employed or smaller companies. In fact, business car leasing is available to:

• Public limited companies

• Partnerships/limited liability partnerships

• Local authorities

• Limited companies

• Self-employed workers

• Charities

• Embassies.

How do I lease a car through my business?

If you fall into one of these categories, you can apply for one or more company cars through a leasing broker. Remember that business leasing is similar to personal leasing in terms of payment commitments – you’ll still need to go through stringent credit checks.

What will the credit checks involve?

Business leasing credit checks are more thorough than personal ones, which are just a personal credit history overview. Your broker will check your business’ credit score, and may also look at your personal score as a director.

You will need to provide bank statements showing a positive net worth from at least the last three months. You should also provide an opening balance sheet.

What if I have a new business?

This will be trickier if you cannot provide evidence of trading profits. However, it’s not impossible – you’ll need to provide a realistic cash flow forecast, or you could consider short-term personal leasing until the business has built up a credit history.

Can I get a business lease with bad credit?

Your personal credit does not always affect your application, though this will be reviewed if you’re the director. A strong business credit rating should put you in good stead. However, if the business has bad credit, for example, a previous Country Court Judgement, you may be refused credit.

Alternatively, some lenders offer a Director’s Personal Guarantee. This is where you agree to take on the debt as director if the company cannot make the payments.

What to consider when getting a business car lease

While leasing offers tax benefits, there are still restrictions, for example on mileage. Before you apply, ask yourself:

• Will employees need the car for personal use? (This includes travel to work, so you’ll need to negotiate a business deal that includes personal use.)

• How long will I need it for? (You’ll have to pay if you cancel the contract early.)

• Can employees meet the mileage limits? (You’ll have to pay a fee if they exceed them.)

• How much can I pay towards a deposit? (Monthly payments are lower with a higher, non-refundable deposit.)

• Is it practical to get an electric or low emissions car? (Electric cars are exempt from company car tax.)

You may also want to buy the car at the end of the contract (a business contract purchase), in which case you’ll have to pay a larger ‘balloon payment’ at the end.

Ask your Leasing Consultant today

We offer a number of options for business car leasing, and are happy to talk through mileage requirements, tax and more. Speak to one of our friendly team members here.