How to choose the right business car leasing option


Business car leasing options have evolved over time, meaning that businesses have far more flexibility when it comes to investing in a fleet of cars. There are many different types of business car leasing options available, but not all of them are suitable for every company. This article will tell you everything you need to know about business car leasing, including what it is, and how it can benefit you, so that you can make the right decision for your business.

What is business car leasing?

Business car leasing is a method of funding low-mileage vehicles for your business. It enables companies to fund the purchase of vehicles for its employees, whilst allowing them to claim back the VAT on the vehicles.

Typically, in a business car lease you pay for the depreciation of the vehicle over an agreed period and agreed number of miles. For example, if you have a car that is £10,000 and after three years it will be worth £5,000 then your monthly payments will cover the depreciation (the difference) over those 36 months.

Types of car leases to choose from

With so many types of business car leasing options, it can be difficult knowing what’s right for you. Here is a summary of the different types of car leases so that you can make an informed decision:

1. Finance lease

Finance leases are frequently used by businesses that don't want to commit to a new car purchase. They are a good solution because they allow you to drive any makes or models within the specified period, which means that each month's lease payment is fixed (unlike with a monthly payment on a loan).

  • Pros: No upfront deposit and low monthly payments, while retaining full control of the vehicle throughout the lease period.


  • Cons: You are liable for the cost of any damage or excess mileage charges at the end of the lease period.


2. Contract hire

A contract hire is when a company agrees to provide you with a vehicle for a set period of time. This may be for running errands or commuting to work, and you just have to pay for the use of the vehicle.

  • Pros: You have complete flexibility over the duration of your agreement. Payments are fixed and there are no mileage restrictions.


  • Cons: You will not own the vehicle at the end of the contract, so you have no option to keep it once it expires.


3. Hire Purchase

Hire purchase is a financing option that allows the business to lease a vehicle for a short period of time. There are two types of hire purchase agreements, either a fixed rate or a floating rate. The fixed rate agreement means the borrower pays an upfront amount and then makes regular monthly payments on the vehicle. The floating rate agreement means that the borrower pays part of the cost at each payment, and this sum is added to the principal in order to pay off the balance.

  • Pros: Fixed costs and payments spread over a couple of years to make new vehicles more affordable and easy to budget for.


  • Cons: There are often high interest rates and penalties, especially if you miss a payment, so you will need to be able to keep up with the monthly instalments.


How to lease a business car?

You can lease a business car in the same way you would a personal car, by following these three simple steps:

  1. Choose the car for you - Every company will have different business needs, so you need to choose the right make and model for you. For example, a chauffeur company may choose a luxury car model to lease, whereas a delivery firm may choose a van. It is also important to take your budget into consideration. For example, the number of employees you have may determine how luxurious or standard the make or model can be.


  1. Choose the right lease - You need to decide what leasing model is right for you by weighing up the pros and cons. You also need to consider how much you are willing to pay a month, the miles you are likely to drive and the length of the contract. These should all be factored into your agreement. If you need assistance with making the right choice, contact the fleet team.


  1. Arrange delivery - After making a deal, and passing credit checks, it's time to arrange when your vehicles will be delivered. Cars can be shipped to either a home or a business address, however you need to consider who is eligible to sign for them.


What are the benefits of business car leasing?


  1. Employees are mobile - You can keep your employees mobile with a business car leasing option. This can help your business to cover more ground which can widen both your employee and customer pool.


  1. You can assign cars faster to new staff - You will always have a vehicle available for new starters or for temporary staff. That way, employees can get  straight on the road so that they can start their job as soon as possible - making the business more effective.


  1. You can switch your company cars regularly - Leasing a car often lets you drive a new vehicle every few years which can keep your fleet up to date with the latest models and safety features. This can help keep your mind at ease knowing your employees are using safe vehicles whilst you are liable for them.


  1. You benefit from tax advantages - Rentals can be offset against corporation tax. This can allow you to claim back 50% of the VAT on the monthly lease payments and 100% VAT on any maintenance package payments. This often makes business car leasing significantly cheaper than personal car leasing


How to choose the right company car lease for you

In conclusion, the main thing to consider when choosing the right business car leasing option is how your company will be using the vehicles. This can help you to determine the right type of car lease, as well as help you to negotiate a good deal with the right amount of mileage and affordable monthly payments. After all, car leasing should enhance your business and work with your monthly budgets, not cause unnecessary stress.

For more information on MG’s finance options, check out our New Car Offers and Finance guide. To discuss business leasing further, contact the fleet team.