Business car leasing eligibility

  • Who can get a business car lease?
  • How to qualify for a business car lease
  • What are the business benefits of leasing?

As one of the fastest-growing finance schemes in the UK, it’s unsurprising that the number of businesses that choose to lease their vehicles is on the increase.

There are a huge number of benefits to business leasing, so it’s easy to understand why it has become such an appealing option for businesses when they are looking to get a vehicle or a fleet of vehicles.

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

In this article, we look at what makes you eligible to get a vehicle using a business lease as well as some of the benefits to business leasing.

Who can get a business car lease?

Before we get into the benefits of business leasing, it’s important to know whether you’re eligible. So, can you get a business lease?

There are a number of groups that qualify for a business lease.

If you and/or your business are any of the following, then you qualify for a business vehicle lease:

  • Public limited company (PLC)
  • Limited Liability Partnership (LLP)
  • Limited company
  • Sole trader
  • VAT registered business
  • Charity
  • Local authority
  • Embassy

So, as you can see, there are many ways to be eligible for a business lease. Chances are, if you read this article, then you qualify for business car leasing.

How to qualify for a business car lease

When you lease a car, whether it’s through your business or privately, a credit check is conducted. If you’re a business customer, then your business will undergo a credit check., it may also be that the director or directors of the company may also go through a credit check.

The credit check on your business is because the Finance House needs to be sure that you will be able to meet the commitment of the monthly payments. The easiest way for them to know this is to check your financial history by conducting a credit check.

A credit check of your business will include the Finance House looking over many things about your business including:

  • Company history
  • How long you’ve been trading
  • Past payment history
  • Public filings, including legal

A credit report will provide the Finance House with a lot of information about your business and whether you will be able to meet the monthly payments for any vehicle you get on a business car lease, proving your car leasing eligibility.

It is possible that the Finance House may ask for additional information as further reassurance and you will need to be prepared to provide this should it be required. This will maximise your chances of getting finance for a business lease.

What sort of things will I need to show the Finance House?

It’s possible that the Finance House will ask for further evidence of your car leasing eligibility when you apply for a business lease. This additional information could be any of the following:

  • Proof of address of the company director(s)
  • ID for the company director(s)
  • Bank statements from the last three months (or more if available) that show a positive net worth
  • Opening balance sheet

If your company is new then it’s harder to get finance, but it’s still possible. You should be prepared to provide the Finance House with all the evidence that we have mentioned, however, they will also ask for more. This could include a realistic cash flow forecast. When putting this together, you need to ensure that this forecast is realistic.

The key, here, is to cooperate with the Finance House and show them everything that they need to see. They need to be convinced that you will be able to make the monthly payments.

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Car leasing eligibility: What if my business has bad credit?

If, when checked, your business has bad credit and therefore doesn’t meet the car leasing eligibility requirements, the Finance House will run a credit check on the company director(s). If they have a strong credit score then it’s possible that the Finance House will allow you to lease a vehicle on the condition you have a director’s guarantee. This is essentially where the director agrees to take on the payments in the event that the business can’t. Essentially, they are a guarantor for the business.

You should be aware that if you are a new company or your business has bad credit, you may be asked to make a larger initial payment in order to alleviate the risk in the eyes of the Finance House.

If you would like more information about the possibility of business leasing with bad credit, we have written a more detailed article that may help.

What are the alternatives to business leasing?

If you don’t qualify for business leasing, unable to provide a director’s guarantee or make a larger initial payment, then there are alternatives.

These alternatives include buying your business vehicle, or fleet, through a cash purchase either using cash or a bank loan. Another option is buying a second-hand vehicle, which can be more affordable than buying a brand new car outright.

Have questions about the finance options available? Download our FREE guide.

What are the business benefits of leasing?

There are a number of benefits to your business when you lease, which is why it’s so popular.

Cash flow

One of the benefits of leasing a car through your business is 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 money 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.

Leasing vehicles for your business frees up funds so you can continue to do your daily business. You also have the freedom to put down as little or as much as you would like as an initial payment. If you would prefer to pay a larger amount initially then you benefit from lower monthly payments. If you pay a smaller amount upfront then your monthly payments will be larger. However, leasing gives you the flexibility and ability to free up money for your business.

Time-saving

This is often a benefit that is overlooked. However, one of the advantages of leasing is that it can save you a huge amount of time.

If you go through a vehicle broker, like OSV, then all you have to do is tell them about your current situation, your requirements and your budget and they will do all the legwork for you.

We will do the research using the requirements you have given us, negotiate some good deals and then present them to you. You can choose which one of the options you feel suits your purpose the best and let us know. It’s that simple.

Running your own business is a time-consuming concern and you don’t always have time to trawl through a multitude of vehicle websites, looking at specifications to find the right vehicle to suit your needs. If you go to a vehicle broker, like OSV, for help then this is a responsibility that we will take on, they will do all the hard work for you and enable you to get on with looking after the day-to-day running of your business.

Tax benefits

A huge benefit of business leasing is the tax benefits, these are mainly seen when you look at Contract Hire agreements, making this a hugely popular scheme for businesses.

If you’re a VAT registered business and you have a vehicle on a Contract Hire agreement then you can claim 50% of the VAT back on the monthly and initial rental in your quarterly VAT return. If you don’t use your vehicle for personal journeys then you can claim 100% back.

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 110g/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.It’s important to know that in order to be eligible to lease a vehicle through your business it will need a strong credit score. You should be prepared to show the Finance House your company bank statements and possibly your opening balance sheets in order to prove that you are able to make the monthly payments and therefore meet the car leasing eligibility requirements.

It may also be necessary for you to obtain a director’s guarantee.

At OSV we work with businesses every day and help to get them qualified for business leasing. If you have any questions at all about business car leasing, whether it’s eligibility or anything else, contact us and we can help.

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