What is Car Leasing and How Does it Work for Your Business?

What is vehicle leasing?

Business vehicle leasing, or Business Contract Hire (BCH), explained in its simplest form, is a lot like a long-term vehicle rental. In exchange for the use of a vehicle for an agreed period, your business pays fixed monthly payments for the duration of the contract. At the end of the agreed period, you return the vehicle and have the option to take out a new lease on the latest model.

How does vehicle leasing work for businesses?

The steps involved in leasing a vehicle for commercial use are similar to leasing for personal use, with some additional benefits that work to support your business.

How do you apply for a lease?

1. Decide on your budget - consider all costs associated with running a vehicle, including monthly repayments, insurance, and maintenance.
2. Select a suitable vehicle (or vehicles!) - perhaps your business needs vans or LCVs to transport items regularly, or a sleek car to impress clients. Browse the latest models to find ones that meet your needs.
3. Find a lease deal - determine your annual mileage, how much you want to pay upfront, and how long you want the vehicle for. Speak to a leasing specialist about your options and find a suitable deal. They may also be able to offer you add-ons such as a maintenance package.
4. Complete your lease agreement - review the agreement to make sure you understand your responsibilities and the terms. Once you’re happy with it, you can sign the lease.
5. Arrange delivery - providers such as Jurni should offer to deliver your vehicles to your business premises, or offer a convenient way to collect them instead.
6. Use your new vehicle for the agreed period - your business is now free to use the vehicle throughout the lease period, making sure to keep it in good condition and within mileage limits.
7. Hand the vehicle back - after the lease period has come to an end, it’s time to give the vehicle back to the lender and think about whether your business might want to lease a newer vehicle.

What does a lease include?

Different lenders offer different things with their lease deals, but you can typically expect a business lease to include:

• Free delivery nationwide
• Manufacturer warranty, which usually covers the full contract period
• Road tax
• Breakdown cover offered by the manufacturer

Your lease won’t include:

• Insurance - you’ll be responsible for setting up fully comprehensive insurance for the vehicle to last the entirety of the lease period.
• Maintenance, servicing and MOTs as standard - though many lenders offer maintenance packages to help you manage vehicle upkeep, which can be particularly handy if you have several vehicles in your fleet to keep roadworthy.

Advantages and drawbacks of leasing

Business vehicle leasing offers many of the same benefits as personal leasing, with some additional bonuses that could help you save costs and eliminate the price tags of buying outright.

Benefits of business leasing

• Manage costs - vehicle leasing is one of the most cost-effective ways to add a brand-new car, van, or LCV to your fleet without having to pay the full purchase price upfront.
• Avoid depreciation risks - when you buy a vehicle, it begins to lose its value the second it’s driven off the forecourt. However, when you lease a vehicle, the cost and risk of depreciation are taken on by the vehicle funder rather than your business.
• Return rather than resell - when your lease ends, you simply hand back the keys to the vehicle without having to go through the hassle or disappointment of second-hand resale. After this, you’re free to lease another brand-new vehicle and benefit from the latest specifications and technology.
• Warranty - many business customers appreciate the added peace of mind that leasing offers, with a full manufacturer’s warranty included for the duration of the contract.
• Fixed monthly payments - knowing exactly how much the repayments will be each month and year makes it easier to plan finances and improve cash flow.
• Tax benefits - claim back up to 100% of VAT when the vehicles are used solely for business purposes, and up to 50% if used for personal and business use.
• Optional maintenance - any lease contract also has the option to include maintenance, potentially saving your business even more whilst reducing the risk of any nasty surprises.

Drawbacks of business leasing

• Mileage limits - lease vehicles are subject to mileage caps, and you’ll be charged if you exceed the agreed limit. Business vehicles are likely to stack up more miles on the clock each year compared to personal vehicles - lenders understand this, so they often offer higher mileage caps at better rates than personal deals. It’s a good idea to add a buffer to your estimated mileage, just in case of emergencies or additional business needs.
• Wear and tear penalties - although your business won’t own the vehicles it leases, it’ll be responsible for keeping the vehicles in good condition. Lenders anticipate reasonable wear and tear over the years, but could issue end-of-contract charges for anything exceeding fair use.
• No opportunity for ownership - if obtaining the vehicle as an owned asset is important to your business, then leasing might not be suitable for you. You’re obliged to return the vehicle at the end of the lease period, but you will be able to take a lease on a brand new vehicle instead!
• Early exit fees - should your business need or want to end a lease contract early, this won’t be easy. You’ll have to pay a hefty fee to do so, which is why it’s important to make sure you’re fully prepared to see the lease through to the end.
• Limited eligibility for Hire & Reward businesses - if your business uses vehicles for transport in exchange for payment, such as taxis, driving schools, and couriers, this is considered a ‘Hire & Reward’ business. These types of businesses are very unlikely to be accepted for funding.

How to find the best lease deals

To find the best lease deals, you need to find a provider that specialises in business leasing and understands your specific needs.

At Jurni, we provide first-class business leasing, fleet management solutions, and maintenance packages to companies across the UK, making us well-equipped to make sure you get the vehicles you need with none of the hassle. Explore our latest offers today, or get in touch with our friendly team to discuss your requirements.