Business car leasing eligibility

We look at whether you are eligible for leasing a car for your business...

Leasing is one of the fastest growing finance schemes in the UK, and business leasing is on the rise. 

There are a huge amount of benefits to business leasing, so it’s understandable as to why it has become such an appealing option for businesses. 

But, how do you get a business car lease? Are you eligible?

In this article, we look at business car leasing eligibility, and some of the business benefits to leasing.

Who can get a business car lease?

Firstly, who can actually get a business lease?

There are quite a few groups that can qualify for a business lease. You can be a PLC, a Limited Liability Partnership or a Limited Company. You can also be a sole-trader and a VAT registered business. Not only that, but if you are a charity, a local authority or an embassy then you can also get a business car lease if you so wish. 

So there is a wide scope for whether you qualify for business leasing or not, and the chances are that if you are reading this article, that you qualify for business car leasing.

How to qualify for a business car lease

When you lease a car, both through your business and privately, you will have to go through a credit check. If you are a business customer, then your business will have to undergo a credit check. The Director/Directors of the company may also have to go through a credit check.

Your business will have to undergo a credit check because the finance house needs to know that you will be able to make the payments. The easiest way to do this is to check your credit history. A business credit check will include the finance house looking at your company history, how long you have been trading, past payment history and any public filings such as legal filings.  

Your credit report tells the finance house a lot about your business and whether you will be able to make the monthly payments for a business car lease.

However, there are some other things that the finance house might ask to see as additional reassurance. You will have to be prepared to show as much to the finance house as possible to maximise your chances of getting business car finance.

orange illustration of a credit card going into the machine with the title still worried about your credit score? Explore how leasing a car can improve it

What sort of things will I need to show the finance house?

The finance house may ask for proof of address and identification for the Director/Directors of the company.

You will have to provide bank statements that show a positive net worth from the last three months, more if available. You will also have to be prepared to show an opening balance sheet if it is available.

If you are a new company, then it will be harder but is still doable. You should be prepared to show all of what we have mentioned and also provide the finance house with more proof that you can make the payments. For example, a realistic cash flow forecast. The key here is to cooperate with the finance house and show them everything they need to see, and more, they should be convinced that you will be able to make the monthly payments.

If your business has bad credit, then the finance house will run a credit check on the Director/Directors. If they have a strong credit score, then they may allow you to lease a vehicle on the condition you give a Directors guarantee. A Directors Guarantee is essentially where the Director will take on the payments if the business cannot. Essentially, a guarantor but for a business.

If you have bad credit but your business has strong credit, then there shouldn’t be a problem. This is because the credit score of the business will be enough to reassure the finance house that you will make the monthly payments.

Close-up Of A Businessman Checking Credit Score Online On Laptop to check whether he qualifies for vehicle leasing.

You should be aware that if you are a new company or your business has bad credit, you may be asked to put down more initially. This is to alleviate the risk slightly in the eyes of the finance house.

What are the alternatives to business leasing?

If you don’t qualify for business leasing, or are not prepared to give a Directors guarantee or put down more initially, then there are alternatives.

You could buy your business vehicle, or fleet, via a cash purchase. This is where you buy a brand new car outright, either using cash or a bank loan. Your other option is looking at buying a second hand vehicle which is considerably more affordable than buying a brand new car outright.

What are the business benefits of leasing?

There are a huge amount of business benefits to leasing which is why it is so popular.

Cash flow

One of the benefits of leasing a car through your business is down to cash flow. In business, cash is important, and having your cash tied up in a depreciating asset is not ideal, nor is spending a huge amount of cash in one hit. When you lease, your cash is not tied up in a depreciating asset and the monthly payments are often much lower than if you were to go through a purchase scheme.

An electrician in a blue jump suit carrying roll of white cable standing next to his white van

Leasing frees up cash so you can continue to do your daily business. You can also put as much or as little down as you like as the initial payment. Whether you put down a lot for lower monthly payments, or less and are happy paying more monthly payments is completely down to you and your situation. But leasing gives you that flexibility and the ability to free up cash.

Time saving

An often overlooked advantage of leasing is the fact that it saves a huge amount of time. If you go through a vehicle broker then all you have to do is tell them about your current situation and your budget, and they do all the hard work for you.

They will do the research, negotiate some good deals and present them to you. You then choose which one you think is best. It’s really that simple.

When you run your own business, you don’t always have time to trawl through vehicle websites, looking at specifications and prices and calculating your budget. Therefore, if you go through a vehicle broker, they do all the hard work for you, while you do all your hard work with your business. It’s really that simple.

Tax benefits

A huge benefit of business leasing is the tax benefits. These are mainly with Contract Hire, and they make it a hugely popular scheme.

If you have a Contract Hire vehicle then you can claim 50% of the VAT back on the monthly and initial rental in your quarterly VAT return, if you are a VAT registered business. You can claim 100% back if you do not use your vehicle for personal use.

You can also offset the rentals against your monthly tax bill, the percentage of which depends on how much CO2 your vehicle emits. If it emits less than 180g/km of CO2 then you can claim 100% back. Any more than that, however, and you can only claim 85% of the rental against profits.

best vans to lease

In conclusion, to be eligible to lease a car through your business you will have to have a strong credit score. You will have to be prepared to show the finance house bank statements and sometimes opening balance sheets in order to prove that you can make the payments. You may also have to be prepared to make a Directors guarantee, in which you promise to make the monthly payments should the business fail to make them. We work with businesses every day, and we get businesses qualified for business car leasing all the time. So if you have any questions regarding eligibility for business leasing then please do not hesitate to contact us.

Workers In Family Business Standing Next To Van
Rachel Richardson
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