Everything you need to know about business car leasing

Is a business lease right for you? This is everything you need to know.

Managing a business fleet shouldn't mean tying up thousands of pounds in vehicle purchases, or facing nasty depreciation surprises when it's time to upgrade.

Whether you're running a small business with a handful of company cars, or managing a larger fleet, there's a smarter way to keep your team mobile.

Enter business car leasing – a solution that's transforming how UK businesses approach their vehicle needs.

Instead of buying outright, you can access brand-new vehicles with predictable monthly costs, generous tax benefits, and zero depreciation risk.

Your capital stays in the business where it belongs, while you and your employees get access to the latest technology and most efficient vehicles on the market.

But business leasing isn't just about the financial benefits.

It's about simplifying your fleet management, improving employee satisfaction, and projecting the professional image your business deserves.

In this comprehensive guide, we'll cover everything you need to know about business car leasing – from Business Contract Hire (BCH) and salary sacrifice schemes to the best vehicles for business use and how to get started.

By the end, you'll know exactly whether business car leasing is right for your company.

Types of business car leasing

There are several ways to finance vehicles for your business. Here are the main options available.

Business Contract Hire (BCH)

Business Contract Hire is the rental of a vehicle for your company based on set terms over a set period. Your business takes out the lease agreement, employees use the vehicle, and you benefit from VAT savings and predictable monthly costs.

Road tax is included, but you'll face charges for excess mileage or damage beyond fair wear and tear.

Business Operating Lease

With a Business Operating Lease, you pay monthly for your hired vehicle with flexible contract lengths. Monthly costs are agreed upfront with no hidden fees, though early termination comes with additional charges.

Hire Purchase (HP)

Hire Purchase lets you hire the car via monthly payments but own it once the finance is settled. 

Monthly payments are higher as you're funding the complete value, but mileage and condition are flexible since you own the vehicle.

Salary Sacrifice Schemes

Salary sacrifice allows employees to lease vehicles through their gross salary before tax. Employees save on tax and National Insurance, while you save on employer contributions and gain a valuable staff benefit.

Which option is right for your business?

• Want predictable costs and tax benefits? Business Contract Hire
• Need flexible contract terms? Business Operating Lease
• Need complete ownership flexibility? Hire Purchase
• Looking for employee benefits? Salary sacrifice schemes

Can my business lease cars?

Yes, any business can apply to lease cars. This includes sole traders, limited companies, partnerships, and Limited Liability Partnerships (LLPs). But

Business Contract Hire (BCH) allows your company to access brand-new vehicles with predictable monthly costs, generous tax benefits, and zero depreciation risk.

Most funders prefer businesses that have been trading for at least two years with full accounts, though newer companies can still apply.

Why choose business leasing?

Business car leasing offers compelling advantages that can transform how your company manages its vehicles.

From substantial financial benefits to operational efficiencies, here's why more businesses are making the switch.

Financial benefits

Cash flow: Preserve capital

Why tie up thousands of pounds in vehicle purchases when you could invest that capital in growing your business?

Business leasing requires a smaller initial payment (sometimes as little as one month's cost upfront) followed by predictable monthly payments.

This means your working capital stays available for more exciting business investments – whether that's new equipment, staff expansion, or maybe that top-tier coffee machine for the office.

Fixed monthly payments make budgeting simple, and you can add maintenance packages to eliminate surprise repair bills entirely.

Your funds remain liquid and available for opportunities that actually drive your business forward.

Tax savings

Business leasing delivers serious tax benefits that can significantly reduce your annual bill.

If you drive a car emitting less than 110g/km of CO2, you can claim 100% of lease cars against your corporation tax. Even higher-emission vehicles still qualify for 85% relief. All running costs like fuel and insurance are also deductible.

For vans, it's even better – you can offset 100% of lease costs against your tax bill regardless of emissions. Monthly payments count as company expenses, directly reducing your taxable profit.

VAT recovery: Claim back VAT on commercial vehicles

If your business is VAT registered, leasing unlocks significant VAT savings.

Use the car purely for business purposes? You can reclaim 100% of the VAT.

Even if your vehicle pulls double duty for work and personal trips, you can still claim back 50% of the VAT paid.

Service charges like maintenance packages and excess mileage fees offer even better VAT recovery – you can reclaim 100% of the VAT on these, plus offset 100% of the charges against your annual tax bill.

No depreciation: Vehicle residual value isn't your concern

Forget worrying about depreciation – with leasing, that's the funder's problem, not yours.

All cars depreciate in value, especially in those crucial early years. When you lease, you only pay for the depreciation during your contract period, with the residual value risk sitting with the leasing company.

At the end of your lease, there's no faff trying to sell the vehicle or wondering if you'll get a decent price. Simply hand back the keys and walk away, or upgrade to something newer.

This eliminates the stress of vehicle disposal and removes depreciation from your business considerations entirely.

Operational Benefits

Predictable costs and reduced administration

Leasing transforms unpredictable vehicle costs into manageable monthly expenses.

Road tax is included in your lease payments, delivery fees are typically covered, and manufacturer warranties protect you for at least the first three years or 60,000 miles. Although some manufacturer warranties are up to seven years of protection.

MOTs aren't needed for the first three years, and newer vehicles typically mean fewer breakdowns and repair costs.

This predictability is invaluable for business planning and removes the administrative burden of managing vehicle ownership, disposal, and unexpected repair costs.

Employee satisfaction and professional image

New cars aren't just about impressing clients – they're about keeping your employees happy and productive.

Leased vehicles offer the most efficient engines, latest technology, and modern safety features. Happy employees are productive employees, and nobody feels inspired driving an ancient, rattling estate car.

A professional fleet also projects the right image to clients and customers, demonstrating that your business is successful, forward-thinking, and professional.

Flexibility for business growth

Business needs change, and leasing changes with them.

Unlike buying, you're not locked into long-term commitments with the wrong vehicles. Contract lengths typically run between two to five years, and when your lease ends, you can upgrade to newer technology or adjust your fleet size.

Growing team? Scale up your fleet.

Downsizing? Reduce your vehicles without the financial hit of selling.

Want to test electric vehicles? Leasing gives you this flexibility without the commitment of ownership.

Best business cars to lease

Choosing the right vehicle for your business depends on your specific needs, budget, and the image you want to project.

Here are our top recommendations across different categories to help you find the perfect match.

Executive options

When you need to impress clients and reward senior staff, premium executive cars deliver the professional image your business deserves.

The BMW 3 Series remains the gold standard for executive motoring, combining sporty handling with refined comfort. Its reputation for build-quality and driving dynamics makes it a favourite among business leaders who want to enjoy their commute.

The Audi A4 offers understated elegance with cutting-edge technology. Known for its sophisticated interior and efficient engines, it's perfect for executives who appreciate German engineering and premium finish.

The Mercedes-Benz EQE represents the pinnacle of executive comfort and prestige. With its spacious cabin, advanced safety features, and unmistakable presence, it's ideal for businesses where image matters most.

All three offer excellent lease deals with strong residual values, making them surprisingly affordable options for business leasing.

Family-friendly

For employees who need practical vehicles that work for business and family life, these options deliver space, safety, and efficiency.

The Volkswagen ID.7 leads the electric tourer charge with impressive range and a spacious interior. Perfect for business users who want to go electric without compromising on comfort or practicality.

The Hyundai Tucson is the dependable family SUV that handles everything from school runs to client meetings. Its bold design, hybrid efficiency, and generous warranty make it a smart business choice.

The Nissan Qashqai pioneered the crossover SUV category and remains a favourite for good reason. British-built, reliable, and practical, it's ideal for businesses that need versatile vehicles for varied uses.

These models balance practicality with professional appeal, ensuring your employees have vehicles that work for all aspects of their lives.

Electric fleet leaders

Electric vehicles offer the best tax advantages for business leasing, with impressive technology and environmental credentials.

The BYD SEAL came in all guns blazing, ready to shake up the EV market. With its WLTP Comb range of 354 miles, minimalist interior and cutting-edge technology, it's perfect for businesses wanting proven EV performance without the premium price tag.

The Polestar 2 combines Scandinavian design with impressive performance. Its premium feel and 367-mile range make it an excellent alternative to traditional executive cars.

The MG4 EV proves that electric doesn't have to mean expensive. With competitive lease rates and solid build quality, it's perfect for businesses transitioning to electric without breaking the budget.

Electric vehicles currently offer 2% Benefit in Kind tax rates (rising to 8% by 2028), making them incredibly attractive for business leasing.

Budget options

Keeping costs down doesn't mean compromising on quality. These vehicles offer excellent value while maintaining professional standards.

The Renault 5 might be small, but it feels sophisticated and grown-up, with real road presence. Perfect for city-based businesses that need affordable, practical electric transport with modern technology – and the bonus of zero-emission credentials.

The CUPRA Born brings Spanish style and sporty flair to the electric hatchback market. With its 266-mile range and aggressive styling, it's ideal for businesses wanting something different from the usual fleet choices.

The Kia Niro offers hybrid efficiency in a practical crossover package. Its spacious interior and impressive fuel economy make it perfect for businesses watching their running costs.

These vehicles prove that budget-conscious doesn't mean basic – all offer modern features, reliability, and a professional appearance.

Making the right choice

Consider your specific needs: Will the car be used mainly for local business trips or long-distance travel? Do you need to impress clients or prioritise practicality? Are environmental considerations important to your business?

Our business team can help you assess which vehicles best match your requirements, usage patterns, and budget constraints.

The business leasing process

Getting your business fleet up and running is simpler than you might think. Here's what to expect when you lease through Carparison.

Documentation required

You'll need to provide:

• Company registration number
• Years of trading
• VAT number
• Trading address
• Directors' details
• Company bank details

If your business has been trading for over two years, you can simply submit the application. However, if your business is newer than that, funders will usually want to see your latest accounts too.

Most funders prefer businesses that have been established for at least two years and can provide full sets of accounts. A solid trading history can significantly boost your chances of credit approval.

Finance application

You can submit your finance application directly from our website using the page showing your chosen deal, through our online finance application form, or with the assistance of our dedicated Sales Team over the phone.

Once your application is ready, it'll be submitted directly to the funder. They'll carry out a full credit check to make sure you're identifiable at your current address and that you'll be able to afford your chosen lease.

Applications typically take 24 to 48 business hours for approval, but if funders request additional information, this back-and-forth can cause delays.

The best outcome is an accepted application. This means you've been approved on finance and we can formally take your order.

Order acceptance

Once approved, we'll send you a customer order form outlining the vehicle details, term and agreed rental price for you to sign and return. We'll need you to return this alongside our information notice.

At the same time, you'll be asked to upload any applicable verification like a proof of address and identity.

It's then time to pay our arrangement fee of £354.00 including VAT.

Payment and contracts

Next up, we'll send your finance contract for signature when it's released by the funder.

Your finance contract contains all the terms and conditions of your lease agreement. You should read all clauses carefully before signing.

With the help of your dedicated Customer Experience Champion, we'll guide you through the next steps between order acceptance and delivery.

Fleet considerations

If you're ordering a fleet, there's often a discount for larger fleets. This discount varies by funder, vehicle type, and fleet size - there's no definitive minimum number of vehicles needed for fleet discounts.

Delivery

Once the funder has verified your finance documents and your car is ready, they'll give us the go-ahead to book your delivery.

Your Customer Experience Champion will liaise with you and the supplying dealer to agree a delivery date. Your new vehicle will be delivered by the dealer or delivery agent straight to your address.

Ongoing management

Once your business vehicles are delivered, there are a few ongoing responsibilities to keep your fleet running smoothly.

Maintenance

Add a maintenance package to your lease for the ultimate hassle-free motoring.

Combine your automotive costs and wave goodbye to unexpected bills pulling on your purse strings. A maintenance package covers servicing, MOT, and routine wear and tear items, helping you stay on the road and keeping more of your money where you want it – in your wallet.

Not only does it help you budget your vehicle expenses, but it'll also help maintain the warranty, maximise your enjoyment of your brand-new car, and will ensure it always runs at max efficiency.

You can add maintenance packages to your business lease cars, which can be 100% reclaimed on VAT. The maintenance package gets added to your monthly lease payments, making budgeting easier for business vehicles. Without a maintenance package, you'll need to arrange annual servicing yourself.

Insurance

Business car insurance is required and must be arranged separately - it's not included in your lease payments.

There are three classes of business insurance:

• Business Class 1: Short work-related journeys, single driver
• Business Class 2: Same as Class 1 but allows additional named drivers
• Business Class 3: Unlimited long business journeys without set destinations

Which class you need depends on who's using the car and what you're using it for. Business insurance is typically more expensive than personal cover due to increased mileage and risk.

There are also additional insurance products on the market, such as:

• GAP insurance
• Tyre and alloy insurance
• Cosmetic damage insurance

Consider what your business needs and whether you’d benefit from this extra protection. And don’t forget to shop around and find the best deal for what you need.

Compliance

Several compliance elements are handled automatically:

• Road tax is included in your lease payments at the prevailing rate
• No MOT is required for the first three years
• Vehicles must be returned in condition meeting fair wear and tear guidelines

You'll need to ensure drivers have appropriate licences and that vehicles are used within the agreed terms of your lease contract.

Tax and financial considerations

Understanding the technical aspects of business car leasing tax rules ensures you maximise your savings and stay compliant.

Corporation tax relief

Business lease payments can be offset against your corporation tax, with the amount depending on the vehicle's CO2 emissions. Most cars qualify for either 100% or 85% relief depending on their emission levels.

Electric vehicles offer the most attractive tax benefits, with 100% of lease costs being tax deductible.

Benefit in Kind (BiK)

When offering company cars to employees, both employer and employee face additional tax considerations.

As the employer, you'll pay slightly higher National Insurance contributions, while employees pay Benefit in Kind tax based on the car's value, CO2 emissions, and their personal income tax rate.

Electric vehicles offer the biggest BiK advantages. Company car tax on electric cars is currently 2% for 2024/25, rising to 3% for 2025/26, and increasing by 1% each year until 2028/29 when it reaches 8%.

This makes electric company cars incredibly attractive for both employers and employees, with potential savings of thousands of pounds annually compared to traditional vehicles.

BiK can appear daunting, but company car tax often works out cheaper than personal tax, even with petrol or diesel cars.

• Corporation tax relief depends on CO2 emissions (110g/km threshold)
• Van leases have no emission restrictions for tax relief
• BiK rates vary significantly between fuel types
• Electric vehicles offer the best tax treatment until 2030

For detailed calculations and specific scenarios, professional tax advice is recommended to ensure you're maximising available reliefs.

FAQs on business leasing

Here are the most frequently asked questions we get from businesses considering leasing.

What happens if there is any damage to cars?

Vehicle damage is assessed against the BVRLA Fair Wear and Tear guidelines at the end of your lease. Cars acquire normal wear and tear during use, which is acceptable and expected.

If there's excess damage beyond what's considered fair wear and tear, you could be charged additional costs at the end of your lease. This should be clearly outlined in your contract before the lease begins.

What happens if you go over the agreed mileage?

An excess mileage charge will apply if you exceed the agreed mileage covered in your lease contract. This accounts for the extra depreciation affecting the car's value based on higher-than-anticipated mileage.

You'll owe an amount for each mile you exceed, typically between 3p and 30p per mile. You can locate the exact excess mileage charge on your order documentation and finance contract.

The excess mileage charge can vary based on the make and model of your lease car, your total term mileage, your finance provider, and whether you have chosen vehicle maintenance.

This can be avoided by ensuring your annual mileage limit is accurate at the outset, or by requesting a mileage amendment during your lease (though amendments aren't guaranteed and are subject to funder terms). Adjusting your agreed mileage works out cheaper than paying the excess charge.

Can you exit the contract early?

While you can sometimes exit a contract early, you'll still have to make a final payment that will be decided by the funder. Early termination fees may apply, so it's important to understand the terms before signing your lease agreement.

The contract won't go live until your delivery date, so if there's a long wait on a factory order, you can sign ahead of time knowing you won't need to pay until the car is in your possession.

Can you lease if you’re self-employed?

Yes, if you're self-employed you can get a business lease, as leasing providers will consider you a sole trader. You'll need to provide documents as part of a mandatory credit check before being approved for the finance.

You'll also need proof of address and ID, the last three months of bank statements, and your latest trading accounts. The process is the same as applying through a business.

Self-employed business leasing offers several advantages including no company car tax (as there's no legal difference between you and your business), the ability to claim expenses on running costs, and up to 100% off VAT on monthly payments.