Business Car Leasing for the self-employed

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

  • Can you get a business car lease if you’re self-employed?
  • Will you qualify for business leasing if you’re self-employed?
  • What business lease options are there?
  • What are the business benefits of leasing?

More and more people are choosing to be self-employed, deciding to work as freelancers or starting their own small businesses. With the rise of start-ups and the popularity of the ‘gig economy’ (freelancing and temporary work), this increase is no surprise.

Self-employed baker

Of course, if you’re self-employed, it’s possible that you will be in need of a car and you might be wondering whether it will be possible for you to lease a car via a business lease, rather than getting a personal lease.

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

Can you get a business car lease if you’re self-employed?

If you’re self-employed can you qualify for a business lease? There are several types of person who can qualify for a leasing a car through a business

If you are any of the following you may qualify for business lease:

  • A sole trader
  • Have a limited company
  • A partnership
  • A VAT-registered business
  • An LLP (limited liability partnership)
  • A PLC
  • A charity
  • Local authority
  • Central government
  • An embassy

Essentially, if you are self-employed, you can get a business car lease as you are considered a sole trader. However, there are other criteria that you must achieve before you can lease a car.

Will you qualify for business leasing if you’re self-employed?

To qualify for business leasing you will have to go through a process similar to the one you would if you were applying as a private individual.

When applying for your business lease you will be asked to provide your latest set of accounts. These will hopefully show you have a positive net worth! Sometimes Finance Houses will 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.

Person doing paperwork with calculator

What business lease options are there?

If you’re applying for a business lease there are several options for you to choose from. These options are:

  • 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).

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 Business Contract Hire. You will pay a monthly fixed fee for a set period of time. However, once that time comes to an end you have two options as to what you can do with the leased vehicle.

  1. You find a buyer for your vehicle and introduce them to the Finance House. The buyer will pay the Finance House, who 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%.
  2. You can pay a small fee, usually one monthly payment, and keep the vehicle for another year (this is often called a Peppercorn Rental). Of course, at some point, you will have to make the final balloon payment.

Operating Lease

A Business Operating Lease works in the same way as Business Contract Hire. However, the only difference is that Vehicle Excise Duty is only included for the first year. Operating Leases are not as common any longer, with them primarily being offered by Mercedes.

NEED ADVICE ON YOUR FINANCE OPTIONS?

Our experts can help you find the right finance for your individual needs

Call 01903 538835 or request a call back

What are the business benefits of leasing?

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

  • If your business is VAT-registered then you can offset 50% of the VAT on a car
    • If you have a van you can offset 100% of the VAT
  • Finance commitments can be “off balance-sheet” for vehicles on Contract Hire or Operating Lease
  • If you get your car on a Finance Lease, the financial commitments are “on balance-sheet”
  • Your money won’t be tied up in a depreciating asset
  • Monthly payments are fixed which makes for easy budgeting
  • Vehicle Excise Duty is usually included
  • On occasion, business leasing can be cheaper than personal leasing
    • We’ll go into more detail about that below.
Woman using bluetooth in car

Do you have to pay Company Car Tax if you’re self-employed?

So, is it better to lease through your business or as a private individual?

Most of the time we recommend that if you can go through your business then you should. This is because of the benefits that go alongside a business lease.

When you lease through a business you often have access to greater fleet discounts, meaning that it can cost less to lease through your business.

If you are self-employed then you are also exempt from paying Company Car Tax, and this can certainly make business leasing more appealing if you’re a sole trader.

However, there are some occasions when it will be better for someone to get a personal lease; when this is the case we will recommend you go down that route. If you are unable to provide the information the Finance House needs about your company, you don’t have the latest set of accounts that show your business has 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 take out a personal finance solution for your vehicle.

Image of word Tax on coins

If you do lease privately, it will still be necessary to go through the credit check process to ensure that you can make the monthly payments. If you have a bad credit score then don’t be disheartened, there are options available to you.

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 which option is best for your individual situation. Call our specialists on 01903 538835 or request a call back for advice on which one is right for you.

SELF EMPLOYED AND READY TO LEASE A NEW CAR?

Request a call back and one of our specialists will guide you on your best option to suit your situation. We can then find you the perfect vehicle for your work at a budget that suits your finances.

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Rachel Richardson
Latest posts by Rachel Richardson (see all)

21 Comments

  • Dottie| 27th December 2019 at 1:13 pm Reply

    Can you insure someone else on to the car?

    • Rachel Richardson| 2nd January 2020 at 11:31 am Reply

      Hi Dottie,

      The Lease Company won’t have a problem with this (as a rule), however, this is a question you will need to ask your insurer. Some will be more restrictive than others. We hope that this helps to point you in the right direction.

  • 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

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