Business Car Leasing for the self-employed

We look at everything you need to know about business car leasing for the self-employed

More and more people are becoming self-employed and with the rise of start-ups and the ‘gig economy’, it’s no surprise.

Of course, if you are a self-employed, then you will most likely need a car. And if you are self-employed, you might be wondering whether you can lease a car via a business lease, rather than a personal lease.

In this article, we look at business car leasing for the self-employed including looking at what business options are available to you, the criteria and the business benefits of leasing.

Business of flower shop with woman owner

Who can get a business car lease?

Firstly, let’s see whether a self-employed person can qualify for a business lease.

You can lease a car through a business if you are any of the following;

  • A Sole Trader
  • Have a Limited Company
  • A Partnership
  • A VAT registered business
  • A Limited Liability Partnership (LLP)
  • A PLC
  • A Charity
  • Local Authority
  • Central government
  • An Embassy

In short, if you are self-employed, you can get a business car lease because you are a Sole Trader. However, there are other criteria that you must achieve before you can lease a car, which is what we are going to talk about next.

Will I qualify for business leasing if I’m self-employed?

To qualify for business leasing, then you will have to go through a similar process as if you were a private individual.

You will normally need to provide your latest set of accounts hopefully showing a positive net worth! Sometimes finance houses ask to see your latest bank statements as well as proof of address and ID. You will also have to go through a credit check.  

If all of this checks out, then there is no reason why you should not be able to get a business lease.

files in a white box

What business lease options are there?

Now let’s have a look at your finance options;

  • Business Contract Hire
  • Finance Lease
  • Operating Lease

Business Contract Hire

Business Contract Hire is one of the most popular forms of leasing and is what people are often talking about when they refer to leasing.

Business Contract Hire involves paying a fixed monthly fee for a period of time, sticking to pre-agreed mileage and condition restrictions. Once that time is up, you hand the car back with nothing more to pay (subject to mileage and conditions).

You can watch our Business Contract Hire video below.

Finance Lease

Finance Lease is a great option for businesses. There are no mileage restrictions or condition restrictions on this scheme.

A Finance Lease works in the same way as a Contract Hire in which you pay a fixed fee for a set period of time. Once that time is up, however, things vary. You will have to find a buyer for your vehicle and introduce them to the finance house. They will pay the finance house and the finance house will use that money to pay off the remaining balloon payment. If you sell the vehicle for more than the balloon payment, you get the equity. If you sell it for less, however, you will have to make up the remaining balance. It should be noted that the lease company may charge a small fee for processing this. This is usually between 0.5% and 2.5%.

Alternatively, you can pay a small fee, usually one monthly payment, and keep the vehicle for another year (often called a peppercorn rental). But at some point, you will have to make the final balloon payment. You can watch our video on Finance Lease below.

Operating Lease

Operating Lease works in the same way as Contract Hire. However, the only difference is that road tax is only included in the first year. There aren’t many manufacturers that do Operating Lease nowadays, it’s mainly Mercedes

What are the business benefits to leasing?

There are plenty of benefits to leasing through your business if you are self-employed or otherwise, which is why it’s so popular. For example;

  • If you are a VAT registered business then you can offset 50% of the VAT on a car
    • And 100% on a van
  • Finance commitments can be “off balance sheet” for Contract Hire and Operating Lease
  • For Finance Lease, the finance commitments are “on balance sheet”
blond women talking on the phone via Bluetooth headset whilst driving
  • You won’t have your cash tied up in a depreciating asset
  • The monthly payments are fixed which makes for easy budgeting
  • Road tax is usually included
  • On occasion, business leasing can be cheaper than personal leasing
    • We’ll go into more detail about that below.

You can read more about the business benefits to leasing here.

Do I have to pay company car tax if I am self-employed?

If you get a car through your business, then you may have to pay company car tax.

However, you are exempt if you;

  • Are a Partner or a Partnership
  • A Member of a Limited Liability Partnership
  • You are the proprietor of your own business

Which means that, if you are self-employed, you are exempt from company car tax. However, if you become a Limited company, then you will have to pay company car tax.

Business car leasing vs. Personal car leasing for the Self-Employed; Which is better?

Is it better to lease through your business or do it privately?

Most of the time, we recommend that people go through their business if they can. This is due to the benefits that go alongside it. When you lease through a business you often have access to greater fleet discounts, meaning that it is cheaper to lease through your business. You can read more about that here.

You are also exempt from company car tax as a self-employed person, which makes business leasing more appealing if you are a sole trader.

However, there are some occasions in which it is better to lease privately, in which case we would recommend you go down that route. For example, if you cannot provide the information the finance house needs about your company, or you do not have your latest set of accounts showing a positive net worth or the vehicle you are looking at has a high CO2 rating and/or P11d value, then you may have to go privately.

3 wooden blocks standing on stacks on coins spelling out the word tax

If you do lease privately, you will still have to undergo a credit check to ensure that you can make the monthly payments. If you have a bad credit score, then don’t be disheartened, you can read our article on how to lease with bad credit here.

Whether you choose to lease through your business or privately is up to you, but most of the time we would recommend you lease through your business. You can read more about leasing privately here.

In conclusion, you can lease a car if you are self-employed, but you will have to go through the same processes as other businesses and private individuals. There are a lot of advantages to leasing through your business including tax benefits and the fact that you could end up getting a better deal than if you went privately. However, it isn’t for everyone, and you may find it easier or better for your situation if you lease privately. Ultimately, though, it’s down to what is best for your situation.

SELF EMPLOYED AND READY TO LEASE A NEW CAR?

Request a call back and one of our specialists will find you the perfect vehicle for your work at a budget that suits your finances.

Holly Martin

Content Co-ordinator at OSV Ltd
Holly enjoys: Reading, music and spending time with friends.

Within a week of Holly starting work at OSV she became an indispensable part of the marketing team. She's very intuitive and gets on with the whole office effortlessly.
Holly Martin

19 Comments

  • Basso| 21st September 2019 at 11:00 am Reply

    I am self employed but not registered for VAT. Are there any other tax benefits for me leasing a car?

    • Rachel Richardson| 23rd September 2019 at 4:39 pm Reply

      Hi Basso,

      Thank you for your comment. We have another article on the site which may be of help to you that you can find here ‘Tax benefits and implications of business car leasing’. If you have any more questions and are interested in leasing through your business, please get in touch with Amanda on 01903 223391.

  • Callum| 25th May 2019 at 2:54 pm Reply

    Hi, i have just got a new job which is technically self-employed. Trying to find information on how a company car works is hard and i was wondering how the insurance works, do i have to insure the car the normal way of contacting an insurance company and classing it as my own vehicle or do i speak to the people i would arrange the business contract hire from (i.e ford, bmw, etc) Thanks

    • Rachel Richardson| 29th May 2019 at 11:15 am Reply

      Hi Callum,
      If the car has been provided by the company then normally the company would insure it. However, if you are financing the vehicle yourself, then you would need to insure it. Our consultants at OSV would be more than happy to assist you with the vehicle and at the same time introduce you to a brilliant insurance company. If this is of help, please call Amanda on 01903 223391.
      We hope that you find this information of help.

  • Paul| 29th April 2019 at 4:31 pm Reply

    Hi. I am thinking of leasing a car and would ideally like to put it through my business. However, I don’t really need a car to conduct my business as I work from home. Can I still put it through the business? Thanks

    • Rachel Richardson| 30th April 2019 at 1:30 pm Reply

      Hi Paul,
      I don’t see any reason why not.

      I can get one of our independent advisors to contact you so you take the best route for your next vehicle. If you would like to request a call back via our contact page, or call us on 01903 538835.

  • Liz Harwood| 16th August 2018 at 12:43 pm Reply

    I am self employed and thinking of leasing a car which I will pay through my business account – I am looking at a car about £200/month and with less that 130 co2 emission, is it right that i can claim back 50% of this monthly charge in my self assessment tax return.
    I expect to use the car for mainly business (say 70/30 business use).

    • Abbie Rawcliffe| 17th August 2018 at 4:56 pm Reply

      Hi Liz,
      The latest information we have is that if the CO2 is less than 110 you can offset 100%. If the CO2 is above this you can offset 85%. Regarding VAT you can offset 50% of the VAT on the rental, however, we are not accountants and you should seek your own independent advice from a qualified accountant.

      Can we help you with finding the perfect car? We do have a great team here who help customers just like you. If we can be of help, please email amanda.lelliott@osv.ltd.uk

  • Bert| 8th July 2018 at 10:23 am Reply

    Hi, I was wondering what the situation is if you are employed full-time but also registered self-employed for part-time casual work? My sole trade/self-employed income wouldn’t make for a good balance sheet but add to this my full time wage and it’s a different story. Would I be eligible for a business lease? I would use the car for mainly personal use including commuting to and from my main place of (full-time) employment. Not sure if this sounds legit or some sort of fraudulent tax dodge. Thanks!

    • Abbie Rawcliffe| 9th July 2018 at 2:33 pm Reply

      Hi Bert,

      Thank you for your comment. We have passed this onto our vehicle specialist team who will be in contact with you to provide answers to your question.

    Leave comments

    Your email address will not be published.*



    You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

    This site uses Akismet to reduce spam. Learn how your comment data is processed.

    Back to top