Leasing for new companies
- Can a new company get a business lease?
- What are the risks for a new company getting a business lease?
- Top leasing tips for new companies
- What finance options are available?
- What are my options if I don’t qualify for finance?
If you’ve just started up a new business and you know that you’re going to need some vehicles, you may be wondering if you’re eligible for a business lease or not. So, is it possible?
Ultimately, yes. However, there are some things that you need to be aware of first.
Of course, leasing a vehicle, whether it’s a car or a van, isn’t quite as straightforward as making a phone call and having the vehicle, or fleet of vehicles, delivered right to your door.
We’ve worked with a lot of companies, both new and well-established at OSV, so in this article, we’re going to talk about everything you need to know about leasing a vehicle through a new company.
Can a new company get a business lease?
Yes, it can.
There are many benefits to leasing a vehicle and one of them is that it’s much less stressful than buying, especially if you’re looking at vehicles for your business.
One of the significant benefits is that your money won’t be tied up in an asset with depreciating value. If you add up the cost of depreciation and the money you would lose if you were to buy a new vehicle then leasing definitely makes more sense.
If you go through OSV, a broker with access to a multitude of discounts and 23 different Finance Houses, then you could find you end up paying less than the value of the depreciation for the vehicle. It is in your company’s best interest to lease.
All that having been said, it’s a little more difficult to get a lease if your company is new.
What finance options does a new company have?
The finance options available depend greatly on the type of vehicle you are looking for, whether it’s a van or a car.
Finance options for van leasing
- Finance Lease
- Business Contract Hire
Finance options for car leasing
- Finance Lease
- Business Contract Hire
- Business Contract Purchase
Want to find out more about the finance options available? Download our FREE leasing guide below.
What are my options if I don’t qualify for business leasing?
If, after you’ve applied, you find out that you don’t qualify for leasing because your company is new, then there are alternatives.
You could either look at a Cash Purchase or look at buying a second-hand van. A Cash Purchase is where you buy the vehicle outright, and as there is no finance agreement involved there is also no application process. Another option to consider is purchasing a second-hand vehicle.
How can a new company get a business lease?
One of the downsides of trying to get a lease car if you’re a new company is that some Finance Houses won’t consider approving you for a lease.
However, you do have options. At OSV we work with 23 different Finance Houses and some of those will look at your accounts and how long you’ve been trading. There is also other paperwork you may be asked to provide, including:
- 3 years address history
- UK residency
- No current CCJ’s
- Opening balance sheet (if available)
- Proof of positive trading
- A Director that can act as guarantor
- Full UK driving licence
It’s possible they will also ask you to provide a Director’s Guarantee, this is when a company director will take on the responsibility of making the lease payments if the business proves unable to do so.
If your new business accounts are strong then it’s possible they won’t ask for a Director’s Guarantee at all. Though if your accounts show that there is a positive net worth that shows you are unable to cover the cost of the lease, or the business is showing negative net worth then you will be asked to provide a Director’s Guarantee.
If the Finance House does ask you to provide a Director’s Guarantee then it will carry out a credit check on their accounts. If the company director has bad credit then there’s a good chance that your application for a lease won’t get approved.
What are the risks of a new company getting a lease?
As I mentioned, there are some Finance Houses that won’t consider new companies, which will potentially reduce the number of manufacturer options you’re presented with.
The second risk is that you won’t get approved. As your company is new this is possible. Finance Houses usually require at least three years’ worth of accounts and trading history before they will decide whether to lend a business money. As a new company, there is a likelihood this is something you won’t have.
We’re not saying that you’ll definitely be denied credit, but it is something you need to be prepared for.
Our advice is to look at getting a personal lease if your business application is rejected. As, once your three-year personal lease is up for renewal, your business will have a longer history and you’ll have a much better chance of getting approved.
Top leasing tips for new companies
These are a few tips that we always offer to anyone who is looking to get finance, whether personal or for their business and they’ve stood us in good stead.
Do your research
This may seem obvious to some as there is a lot of information out there and not all of it is relevant or accurate. Make sure you know exactly how business leasing works, as well as the benefits and the pitfalls. You also need to be aware of the options available to you when you start the search.
We would recommend you speak to an expert, like the team at OSV, as we can tell you exactly what you need to know and explain everything you might be unsure of.
Want to talk to someone about your leasing requirements? Reequest a callback from a member of our team now, or call us on 01903 538835.
Think about your budget
As a new company, this is probably something that you’ve already put a lot of thought into. When you lease a car there are additional costs that you should consider, including:
- Fully comprehensive insurance
- Servicing costs – this includes if you have decided to get a maintenance agreement
- Potential excess mileage charges at the end of the agreement
- Potential fair wear and tear charges if the damage to the vehicle is beyond that outlined in the BVRLA Fair Wear and Tear guidelines
- Company Car Tax
How long will you have the vehicle?
There’s no getting away from it, starting a new business means that you are taking a risk.
When you’re first starting out we’d advise that you go for an affordable lease for a short period of time, perhaps 2 years. Once those two years are up you can see where your company is positioned financially and look at a longer contract on a higher cost lease.
Alternatively, if the worst were to happen; your company isn’t doing so well or it’s actually gone under, then you will have only had a lower cost lease for two years.
Company Car Tax
If you have a company vehicle, then you may have to pay Company Car Tax.
If you have decided that you are going to get a van then the tax rules are slightly different. Here we’ll explain everything you need to know about Company Car Tax.
Company Van Tax
You will have to pay Company Car Tax if you use your van for personal journeys.
When it comes to vans there is a set rate when it comes to Company Van Tax. How much of this you will need to pay depends on your tax bracket.
It’s also important to know exactly what HMRC defines as a van for tax purposes:
- A vehicle primarily constructed for the conveyance of goods or burden
- A gross vehicle weight – fully laden – not exceeding 3,500kg
The fixed-rate is £3,500. So, if you are paying 20% tax, then you will be paying 20% of this cost. This is £700 a year or £58.33 per month.
If you have an electric van, you will pay £0 overall.
Company Car Tax
Where Company Van Tax is worked out depending on your tax bracket and a set value for the vehicle, when it comes to cars, it’s very different.
It’s pretty self-explanatory really, you get a Benefit-in-Kind, which you will often hear referred to as BiK, from your company (in this case your car) and you have to pay a tax on it. How much you need to pay will depend on three things:
- how much CO2 the vehicle you have been given emits
- the P11d value of the vehicle
- the tax bracket you’re in
There are some exceptions to this rule, including if the vehicle has been modified for mobility purposes, or you are a partner in a Limited Liability Partnership.
We have an article that details all the ins and outs of Company Car Tax and includes everything you need and your employees know before getting a company car.
Hopefully, all the information we have included will help you to make a decision about leasing if you have just set up your business. If you are, for some reason, unable to get finance through your business as it is new then the options we have mentioned are ones that could be ideal for you.
As always, we recommend that you look over all the options carefully and if you are in need of further advice, we have an experienced team who will be able to help you.