If you're a new business or a start-up, what are your options when it comes to vehicle leasing?
Starting out in business can be a tough 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?
To talk you through the process of vehicle leasing for start-ups and new businesses, Nationwide Vehicle Contracts has put together a short guide explaining the different finance options available to you, as well as the documentation required to lease a car or van.
Business Leasing
The obvious first route that any business when it comes to leasing a car or van is to take a look at Business Leasing. (LINK: https://www.nationwidevehiclecontracts.co.uk/guides/business-leasing/)
Whilst you may not have much in the way of company history, a business may well be eligible for Business Finance Leasing provided they can supply certain documentation. Check out our Financial Eligibility Quiz (LINK: https://www.nationwidevehiclecontracts.co.uk/guides/business-leasing/finance-elgibility-quiz ) to see if you can take advantage of some great deals when it comes to Business Leasing.
In order to lease a vehicle through Nationwide Vehicle Contracts, your business will need to undergo a credit check as part of the finance application process. You will be asked to provide the following information when you fill out the Business Finance Application form:
- 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 are a start-up or a new business which 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.
Business Lease Options
There are three main business leasing options that are available to businesses, each created for certain type of business requirements.
Business Contract Hire is a long-term vehicle rental agreement that is suitable for sole traders, partnerships and limited companies. The vehicle is rented over a period of 2 to 4 years and returned to the leasing provider once the contract ends.
Business Contract Purchase is a finance agreement for VAT registered companies and businesses that want to own their own high-value vehicles whilst avoiding the risk of asset depreciation. With this, a company chooses a brand new vehicle, pays an initial deposit and then pays for the car or van in fixed monthly instalments. At the end of the contract, the company has the option to purchase the vehicle at an agreed price known as a balloon payment.
Finance Lease is only available to business customers – including limited companies and sole traders - and offers flexibility and tax advantages to eligible companies that don't have upfront funds. As part of a finance lease agreement you can choose to pay either the entire cost of the vehicle, including interest charges, over an agreed period or you can opt to pay lower monthly rentals with a final payment based on the anticipated resale value of the vehicle. Throughout the agreement, the vehicle remains the property of the leasing company. If the business is a VAT registered company, they can reclaim between 50% and 100% of the VAT payments depending on whether it is a car or commercial vehicle, and it may also be possible to offset payments against taxable profits.
Personal Leasing
If the lack of a financial or company history hinders your chances of being accepted for Business Leasing, you may want to consider taking out a personal lease contract instead. Unlike Business Leasing which looks at the company’s financial history, a Personal Lease Contract looks at an individual’s finance history to establish if you are eligible for vehicle finance. This is popular option with sole traders who want the advantage of leasing a new car or van but don’t want to wait for the business to build up its financial history. You can check your eligibility for Personal Finance by taking our Personal Financial Eligibility Quiz.
When filling out a Personal Finance Application, you will need to provide the following information:
- Personal details - including marital status and number of dependents
- Address details – including any properties you have lived in for the past five years
- Employment details – including start and end dates for the past three years
- Your bank details – including bank name, account number and sort code
- Your monthly income and expenditure – including gross annual income, mortgage/rent payments, monthly bills and any other expenditure you may have
Personal Lease Options
There are two main types of Personal Leasing options available:
Personal Contract Hire is a long-term rental agreement where you pay to ‘rent’ the vehicle throughout the duration of your contract via monthly payments over a 2 to 4 year period, and then return the vehicle at the end of the agreement, leaving the finance company to worry about depreciation values and disposal of the car.
Personal Contract Purchase involves an initial deposit payment, followed by agreed monthly payments, and ending with an option to purchase the vehicle at the end of the contract (if you so wish) or to return it to the finance provider. The monthly payments are not subject to VAT.
Short-Term Leasing
If Business Leasing and Personal Leasing are not suitable for you, start-up and new businesses may want to consider looking at Short-Term Leasing. With Short-Term Hire agreements of up to 90 days do not require a credit check so the lack of a financial history does not come into play here. Insurance cover is also included in the rental, as well as maintenance, breakdown and recovery.
Take a look at some of the options available for Short-Term Leasing here to decide if this may be the perfect option for your business.
Have a question about vehicle leasing for start-up or new businesses? Leave a comment below or call Nationwide Vehicle Contracts on 0345 811 9595 to speak to one of our experienced lease specialist about the best option for you and your business.
