Vehicle Leasing for Start-Ups and New Businesses

Starting out in business can be challenging enough without the worries of what to do about transport. With little to no financial history, start-ups and new businesses often struggle to get credit for vehicle finance, so what are your options?

Whether you need something for client visits, deliveries, or simply to project a professional image, leasing can be a flexible and cost-effective solution. However, before you jump in, there are a few key things you should know. 

In this blog, we’ll cover everything you need to know about vehicle leasing for new businesses, including the types of contracts available, financing options, tax advantages and insurance considerations, and how business and personal leasing compare. 

Let’s keep this simple. Yes, you can. 

Although most finance providers prefer you to have at least two years of trading history, it’s not a strict rule. 

If you can show you’re financially stable and able to cover the monthly payments, you’ve got a good chance of approval.

The main types of organisations eligible for vehicle leasing include: 

• Partnerships 
• Sole-traders/self-employed 
• Limited companies 
• Public limited companies 
• VAT-registered and non-VAT-registered companies 
• Charities 

Your first port of call will likely be a business lease agreement. Although you may not have much in the way of company history, a new business may well be eligible for business leasing, provided it can supply certain documentation (see below). 

You’ll also need to undergo a credit check (and pass it) as part of the finance application process. 

When you fill out the Business Finance Application form, you’ll be asked to provide the following information: 

• Company details – including name, address, company reg. number and annual turnover
• Director details – including name, date of birth, and marital status
• Business bank details – including bank name, account number, and sort code

If you’re a start-up or a new business that has been established for less than two years, you may also need to provide additional information to support your finance application, such as:

• 3 months’ business bank statements
• Management accounts (if available)
• A director’s guarantee (Limited Companies only)

In some cases, a larger initial rental may also be required, but this depends on the finance provider. 

One of the biggest challenges for new businesses is limited trading history or a low credit score. However, this doesn’t have to be a dealbreaker. Possible routes include: 

• Higher initial payment - Offering 6-12 months upfront can reassure the lender. 
• Personal contract hire (PCH) - Lease the vehicle in your own name if your personal credit is higher. 
• Improve your credit profile - Register your business with a credit agency, pay invoices on time, and keep debt-to-income ratios low. 

To give you a rough idea, here’s how monthly costs might look for different types of vehicles: 

Prices are indicative and very based on specification, mileage, and current market conditions.

If you’re unsure whether to go for a business or personal lease, here’s a quick breakdown to help you decide:

Some new businesses prefer the option to own the vehicle at the end (contract purchase), while others don’t want the hassle and would rather return it to the finance provider (contract hire). Here’s how they compare: 

• Contract hire - Lower upfront costs, maintenance usually available, and you return the vehicle at the end. It's best for flexibility. 
• Contract purchase - Upfront costs slightly higher, maintenance usually available, and you have the option to buy at the end. It's best for ownership without large upfront payments. 

All lease vehicles must have fully comprehensive insurance. With a business lease, the company covers the insurance costs (and in some cases, fuel costs).

The vehicle will need to be insured from the day of delivery and remain insured until it’s collected.  

If your new business wants to lease multiple vehicles, you may want to consider fleet insurance.

One of the biggest advantages of business vehicle leasing is the positive tax implications. 

• VAT is 100% reclaimable if the vehicle is used solely for business. 50% reclaimable if there’s any personal use. 
• VAT is also 100% recoverable on the maintenance element of a contract (if added) 
• Lease payments can be claimed as an allowable business expense. 

It’s worth noting that if the vehicle is used for personal use, you’ll pay BiK tax based on its CO2 emissions and P11D value. 

Leasing is particularly appealing for start-ups and new businesses because: 

• It avoids the large upfront costs of buying outright 
• You can choose the contract length and mileage to match your needs
• It’s easier to upgrade to new models when your business grows 
• Many lease deals include optional maintenance for predictable running costs 
• Loads of hybrid and electric vehicles are available to lease, ensuring your business is as eco-friendly as possible 

Ready to explore your options? View our business leasing deals and see how Nationwide Vehicle Contracts can help your start-up get moving.