Lease your business vehicles

Business car leasing explained

Find out how business car leasing works, what it costs, and whether it’s the right fit for your company.

What is business car leasing?

Business car leasing allows your company to use a car for a fixed period, typically one to five years, by paying monthly instalments to a leasing company. You don’t own the car, instead, you return it at the end of the contract or start a new lease with a different model. It’s a flexible, predictable way to keep your business running with minimal upfront costs. Leasing may suit you if you:

  • Want newer vehicles with lower running costs

  • Prefer fixed, manageable monthly payments

  • Don’t want to deal with depreciation or resale

If you’d rather own your company car at the end of the term, business car finance could be a better fit.

How does business car leasing work?

Here’s a step-by-step overview of how business car leasing works: 

  1. Start by selecting a make and model that best suits your business. You may want to consider factors such as mileage, running costs, fuel type, and the image you want your business to project.

  2. Compare different leasing companies and review their terms carefully. Their agreements will vary in length, mileage limits, and optional maintenance packages.

  3. Once approved, you will agree on the monthly payment amount, contract length, and mileage allowance.

  4. Once you receive the car, your business will make fixed monthly payments for the duration of the lease term.

  5. When the contract ends, you can return the vehicle, renew the lease with a new model, or, in some cases, buy the vehicle for a pre-agreed price.

Why lease a car through your business?

  • Flexible solutions tailored to your needs

    With options ranging from short-term contracts to long-term agreements, you have the freedom to choose the duration and terms that best suit your business goals.

  • Predictable costs and financial benefits

    By spreading the cost of vehicle usage over fixed monthly payments, leasing eliminates the unpredictability of maintenance expenses and depreciation associated with ownership.

  • Access to the latest technology and features

    Your business can access the latest car models equipped with advanced technology and features, enhancing both driver experience and operational efficiency.

What are the advantages and disadvantages of business car leasing?

Advantages

Disadvantages

You can get a new vehicle without paying the full purchase price upfront.

You won’t own the car, so there’s no asset to sell or trade in at the end.

It allows access to the latest models with up-to-date features and technology.

Most agreements include mileage limits, and exceeding them can lead to extra charges.

Servicing and maintenance are often included, saving time and reducing unexpected costs.

Ending the contract early can result in additional penalty fees.

Monthly payments may be tax-deductible if the car is used solely for business purposes.

You could face charges for any damage beyond normal wear and tear when returning the vehicle.

Driving newer cars helps your company project a modern and professional image.

Contracts can limit flexibility and may restrict personalisation or branding.

Are there different types of business car leasing?

There are two different types of car leasing: a finance lease or an operating lease. 

  • In a finance lease, the leasing company purchases the car on behalf of your business and will lease it back to you for an agreed period. At the end of the lease term, you may have the option to purchase the car for a predetermined price.

  • An operating lease is a shorter-term arrangement where your business leases the car for a fixed period. At the end of the lease term, the car is returned to the leasing company. Operating leases often include maintenance and servicing as part of the agreement.

Are there any tax benefits associated with leasing a car through my business?

If you lease a car for your business, you won't own it. But you can still claim the monthly rental fees which can help you save money on your Corporation Tax. 

Historically, you couldn’t claim capital allowances on a leased car or vehicle – only cars purchased outright or through hire purchase were eligible for a 100% tax relief in the first year. However, in the Spring Budget 2024, it was announced that full expensing would be extended to leased vehicles. Legislation is yet to be published for this, so it’s important to consult with your accountant to check the current rules and regulations that may apply. 

If you opt to lease an electric company car, you may also be able to access government schemes and incentives, such as the Workplace Charging Scheme, which would lower the cost.

When business car finance might be more suitable than leasing

If you prefer to own your vehicle, business car finance could be a more suitable option. In a finance agreement, your business borrows the funds needed to purchase a car and repays this over time. Once the payments are complete, your business owns the vehicle outright. This can be more cost-effective in the long term, especially if you plan to use the car for several years.

At Capitalise we can help your business find the right finance arrangement by connecting you with a network of over 130 UK lenders. You can explore competitive car finance options, improve your business credit profile, and manage your repayments with predictable monthly costs.

Search for business car finance with Capitalise and compare your options from our panel of lenders

frequently asked questions about business car leasing