Who qualifies for business vehicle leasing?

We look at who qualifies for business vehicle leasing

There are many forms of leasing, and they suit everyone from business customers to private customers.

Business leasing is very popular with both large businesses and smaller ones.

But who qualifies for a business vehicle lease?

In this article we cover which businesses can get a vehicle lease through a business lease, and other considerations.

Who qualifies for business vehicle leasing?

There are a few different types of people that can get a business vehicle lease.

A Sole Trader

If you are a Sole Trader, then you can get a business lease. In the case of business leasing, a Sole Trader can be anyone who has a bank account in a Sole Trader name.

For example, if you have a private bank account in your name and you also have a bank account trading in your name then, in the eyes of the finance house, you are a Sole Trader. This can be as simple as having a separate account for your eBay sales, if you use a separate account for your eBay or Etsy business, then you are a Sole Trader.

If you are registered with HMRC, then you can get a business vehicle lease.

Man wearing glasses typing on his computer and currently working on a lease agreement

VAT Registered Companies

If you are a VAT registered company then you are eligible for business vehicle leasing. You will be VAT registered if your VAT taxable turnover is more than £85,000 in a 12 month period.

A Partnership

If you are a business and you have more than two partners working on that business, then you can also get a business car lease.

A Limited, PLC or LLP Company

A Limited Company that is registered to a specific house with a Limited Company Registration Number can also get a vehicle on a business lease.

You will also be eligible for business vehicle leasing if you are a PLC or in a Limited Liability Partnership (LLP).

Essentially, if you are a business that is making money, then the chances are you will be eligible for a business vehicle lease.

What financial requirements do I need for a business vehicle lease?

However, there are further requirements for a business vehicle lease.

Like all lease contracts, regardless of private or business, you will have to qualify financially. This is because, with leasing, you will be making monthly payments for a vehicle. The finance house that is lending you the vehicle will have to be sure that you can make the monthly payments, and to do this they need to know that you have the financial history to do so.

With private leasing, you would undergo a credit check to tell if you would be able to make the monthly payments.

However, as you are getting a vehicle lease through your business then it will be your business that will undergo this check.

Your business will have to have a strong credit score first and foremost. Your credit score will undergo an automated credit check and it will simply look at your score and approve or decline your request based on that.

What if my business has a bad credit score?

If your business has a weak credit score, then there is still a chance you can get a vehicle lease. You may need to submit more to the finance house, however.

For example, you may be asked to provide your business’s bank statements. These should hopefully show a positive net worth, preferably from the past three months. Ideally, your credit score shouldn’t have any CCJ’s. If you have an opening balance sheet then you may also be asked to present that, along with the ID’s and addresses of all Directors of the company.

You may also be asked for a Director’s Guarantee. This is if the business has a bad credit score but the Director of the company has a very strong credit score. If this is the case, then the finance house may ask the Director to promise that they will take on the payments if the business cannot make them.

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Advice for new businesses

If you are a new business, then getting a vehicle lease might be slightly trickier. This is down to the fact that your business might not have much of a credit score which means the finance house can’t be sure whether you are going to make the monthly payments. This is because you might not have made that many payments through your business before.

Therefore, you will have to be prepared to prove that you can make the monthly payments. This could mean that you will have to present a cash flow forecast to show that you will be able to make the payments in the future. Bear in mind this will have to be realistic, overestimating could end up hampering your chances of getting finance.

What is fleet leasing and how does it work?

If you have been looking at business vehicle leasing, then you might have come across fleet leasing. Fleet leasing is common with businesses who want to offer their employees company cars. Company cars are a great perk, and can attract some of the best employees.

Fleet leasing is where you lease a group of vehicles, either vans or cars, for your business and then you give them to your employees to use for business and everyday tasks. Fleet leasing is hugely popular because there aren’t many businesses that want to purchase a large amount of cars in one go. So, leasing is a great option.

Interested in learning more about how fleet leasing works? Discover all you need to know here today

What Business vehicle lease options are there?

The most common business vehicle lease is Contract Hire. If you are looking at leasing a car, or multiple cars through your business, then the chances are you are going to look at a Contract Hire.

Contract Hire, otherwise known as Business Contract Hire or CH or BCH, is where you have a vehicle, or multiple vehicles, for a period of time. This is usually between 2 and 4 years, but can be up to 5 or as short as just the 1 year. During this time, you pay a fixed monthly fee. You also will have a pre-agreed mileage and agree to keep the vehicles in a condition that is in line with Fair Wear and Tear. This is the industry guide by the BVRLA for all lease vehicles on their return.

Once that time is up, you will hand the vehicles back with nothing more to pay. You then get a brand new vehicle or a new fleet of vehicles.

Watch our Contract Hire below for more information.

Your other option is a Finance Lease. This is often popular with van leasing as there are no mileage restrictions or Fair Wear and Tear restrictions. You have your vehicle for a period of time, with a fixed monthly fee and a balloon payment at the end. You can have your Finance Lease for up to 5 years.

Once that time is up, you have two options. You can either sell the vehicle onto a 3rd party buyer to cover the remaining balloon payment, or you can pay a small fee (often called a peppercorn rental) to keep the vehicle for another year. If you sell the vehicle on and you sell it for less than the balloon payment, then you will have to make up the rest. However, if you sell it for more, then you get to keep the equity.

In conclusion, as long as you have a business that is making money, you can qualify for a business vehicle lease. This includes if you are a Sole Trader and simply have a separate bank account from which you trade from. However, there are some financial qualifications that you will have to consider. We work with businesses every day, and we talk them through the qualification process all the time. Therefore, if you have any questions, please do not hesitate to contact us.

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Rachel Richardson
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