Business vs. Personal Leasing criteria
When it comes to leasing, you might be trying to decide whether you want to lease personally or through your business. There are times when our customers start out wanting to lease personally and then change to business leasing, and vice-versa.
But, is the criteria different?
Naturally, there will be a slightly different criteria for business leasing than there is to personal. And, it’s important you know the differences before you decide which one is best for you.
In this article, we look at the difference between the two leasing types, the difference in criteria, and which one would be best for you.
What is the criteria for business leasing?
Business leasing is extremely popular and has been growing in popularity for years.
What are the types of business lease?
There are three types of business lease options that you can choose from;
- Business contract hire
- Business operating lease
- Business finance lease
Business contract hire is one of the most popular forms of business leasing. Essentially, you have a car for a set period of time, paying a fixed monthly amount. When that time is up, you hand the car back with nothing else to pay (subject to mileage and condition restrictions). You can watch our business contract hire video below. https://www.youtube.com/watch?v=sZTKPhA-th8 A business operating lease isn’t done that often, and is really only seen with Mercedes finance. It is the same as business contract hire but road tax is only included in the 1st year. After that, it is down to you to pay it. That’s pretty much the only difference.
A business finance lease is great for those who don’t want mileage or condition restrictions. It’s also the option of choice for those whose vehicles will have conversion units, such as refrigeration units. It works the same way as contract hire in which you pay a monthly fee for your vehicle. But at the end, you are responsible for selling the vehicle to pay of the remainder of the contract. You can also, for a one off nominal fee, extend the contract for another year. You can watch our finance lease video below for more information. https://www.youtube.com/watch?v=y_cxGQzPLZw
Do I qualify for business leasing?
To qualify for business leasing, there will be a few things that the finance house will have to check.
You will provide bank statements. If you are a startup then we advise you consult a vehicle broker about what things you will have to provide. You will also need to provide proof of address and proof of ID for the main Company Director/Directors. The business, and Directors in most cases will also have to go through a credit check. This will also determine whether your business is a limited company and they will be able to gain access to the business registration details. If all of this checks out, then there is no reason that you won’t be eligible for business leasing.
What is the criteria for personal leasing?
So, what about personal leasing?
What are my personal lease options?
If you are looking at personal leasing, then you are probably looking at personal contract hire. This is exactly the same as business contract hire except you are not going through a business. So the concept is the same; you pay a fixed monthly fee and then at the end of the contract you hand the car back with nothing more to pay (subject to mileage and condition restrictions).
If you are looking to own at the end, then you might want to take a look at personal contract purchase or hire purchase. You can watch our video on personal contract hire below. https://www.youtube.com/watch?v=Wxq1SJ0H-iA
Do I qualify for personal leasing?
There is a criteria for personal leasing, just like business leasing. However, they are slightly different. Often, the minimum requirement for getting approved for car finance is employment. This is mainly down to the fact that the finance house will know that you have a regular income to pay off the monthly payments.
However, if you are not in employment then there is a chance you could still qualify. If you are on benefits, or having your income supplemented by benefits, or you have independent income from savings, pension, investments etc. then you could still qualify for a private contract hire. We recommend you read our article on car leasing when you are on benefits here.Another minimum requirement for being able to lease a car is to have good credit. If you don’t have a good credit score then the chances of you being able to lease a car are pretty low. Ultimately, the finance company need to know that you can make the monthly payments.
You can read more about how to get approved for car finance here.
What are the advantages of business leasing?
Now we know the difference in criteria for the two types of leasing, what are the advantages of each?
Some of the advantages of business leasing include;
- VAT registered businesses can offset 50% of the VAT on a car
- This is if you have a business contract hire
- You can offset 100% on a van
- Finance commitments can be “off balance sheet”
- This means the liability of the finance is not shown on the company accounts
- Road tax is usually included
- Except with operating lease
- The monthly payments are fixed
- This makes it easy to budget
- If you have a contract hire, you are handing the car back so you won’t have to worry about depreciation
- You don’t have to sell the car on which means depreciation won’t affect you
- Business leasing can, on occasion, be cheaper than personal leasing. You can read more about that here.
You can read more about the advantages of business leasing here.
What are the advantages of personal leasing?
Some of the advantages of personal leasing include;
- You can drive a better car for the same money
- Because you are leasing, you are essentially paying for the depreciation. This means that you can often afford a better car for the same amount of money.
- The fixed payments make for easy budgeting
- You don’t have to worry about depreciation
- You get a new car every few years
- Getting a brand new car every few years is pretty appealing
- You don’t have to pay company car tax
- This is if you are deciding between personal leasing and business leasing. When you lease through your business you may have to pay company car tax. If you lease personally, then you won’t be eligible for company car tax. You can read more about company car tax here.
So there are some of the advantages to personal leasing. You can read more about the advantages of leasing here.
In conclusion, there is not that much difference in the criteria for business and personal leasing. While the process might be different, the finance house is ultimately looking to see whether you can make the monthly payments. For businesses, that means producing company accounts. For personal leasing, it means checking your credit score. So while the process is different, the finance house is looking for the same thing. If it looks like you can make the monthly payments, then you have a good chance for qualifying for car finance.