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How Does Business Car Leasing Work?

22nd Dec 2021
5min Read
How Does Business Car Leasing Work?

Business leasing, also known as Business Contract Hire (BCH), is a geat way for you to drive a brand new car without worrying about legally owning a depreciating asset.

Leasing a car for business is very similar to personal leasing in that you'll get a brand new car and pay a fixed monthly fee over an agreed length of time – typically between two and four years. You'll still have to stick to an annual mileage and at the end of the agreement, you'll hand the car back and either take out a new contract or find an alternative.

You can read our whole guide on how car leasing works, but for the purposes of this article, we're going to focus specifically on business contract hire.


Are you looking for a business car leasing deal? You can either check out our latest special offers or
configure for a deal that suits you on our website. If you'd rather speak to somebody directly, just give us a call on 0333 1234 333 and one of our leasing consultants will help you find the perfect car. 


What is Business Car Leasing (BCH)?

Business leasing is typicaly referred to as 'Business Contract Hire' or 'BCH' and is a financial agreement between your company and a finance provider. It allows you to lease a car on behalf of a business, usually for 2-4 years for a fixed monthly fee.

An initial payment will be needed to kick off a contract. This is usually calculated by multiplying the expected monthly rental of the car, typically 3, 6, 9 or 12 months.

Important note: Any initial payment will go towards the total lease price

Your business will need to think about many miles each car will do every year. This will often range between 5,000 miles to 25,000 miles, depending on what you need.

Businesses tend to like leasing cars because it's cost effective and means they don't have to commit to owning assets which lose their value over time. If the business has lots of vehicles on their books, they can benefit from fleet lease too, saving even more money.

Still not sure? Read our guide on buying vs. leasing.

The benefits of electric cars for business leasing

A company that has staff who need cars to perform their job function – or which supplies them as a perk (a lot less common than it used to be) – can use business leasing to its advantage, in several ways:

  • No depreciating assets on the books
    Leasing payments do not appear as an asset or liability on a company’s balance sheet. This makes a company’s finances look healthier than if it had a lot of depreciating assets – in the form of company cars – included in the accounts, making it easier to get new investment or bank loans.
  • Low Benefit in Kind (BiK) tax
    Employees who have use of a business lease car can benefit from low Benefit in Kind (BiK) tax rates. BiK is a tax that employees pay for receiving a perk from their employer, such as a business vehicle. Yes, it’s a tax that you have to pay the government, but it’s usually a much cheaper than paying for your own private car. Better still, BiK rates for electric vehicles are currently 0%: they will rise slowly over the next few years, but only by single percentage points.

    Give our company car tax calculator here to get a more accurate idea of what you can expect to pay.
  • Reclaimable VAT
    VAT-registered businesses that have vehicles used solely for work purposes (apart from commuting to the workplace) are able to claim 50% of the VAT on monthly lease payments and 100% VAT on any payments on maintenance packages.

Who can take out a business lease?

To qualify for a business contract hire agreement, you'll need to be a:

  • Limited Company or Private Limited Company (PLC)
  • Sole Trader
  • Partnership
  • Limited Liability Partnership (LLP)
  • VAT-Registered company

Can I reclaim tax on a business lease?

Business car leasing is an attractive choice for many people because there are a number of ways you can save money through tax deductions.You can claim back up to 100% of the VAT on lease payments if you use your car for business use only, although if you use it for personal use as well you can expect to reclaim less. It's worth getting financial advice if you're not sure.

Again, if you use the car solely for business you, you could be entitled to record the full fixed monthly price of your lease, as well as the cost of charging, as a deductable business expense. This can be offset against your tax bill at the end of the year. 

Is business car leasing right for my business?

Whilst almost all business types can benefit from business car leasing, there are certain professions that aren't able to lease cars. These are typically things like driving instructors or taxi drivers, which are classed as 'Hire and Reward' professions.

Business car leasing is a great choice if you: 

  • Want to offer your staff perks like company car schemes or salary sacrifice opportunities
  • Operate a fleet of cars or vans and you don't want huge initial investment or commitment and risk associated with depreciating assets
  • Use your car(s) primarily for business purposes and offset the costs against your tax bill
  • Are VAT-registered and would like to reclaim VAT

Thinking of leasing a new car or van?

We love electric vehicles, full stop. Whether you need an electric car or an electric van, we can help you find a lease that works for you. Leasing with GRIDSERVE just makes sense, for so many reasons. Whether it's the the amazing deals we have access to, our award-winning nationwide charging network or the 100 trees we plant for each and every car we lease, we live and breathe electric cars and vans.

Take a look at our special offers to grab a limited time offer or find for your perfect car to get started.

Prefer to speak to a person? No worries. Give us a call on 0333 1234 333 and we'll do it all for you!

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