Novations: Transferring a Lease Vehicle from one Limited Company to another Limited Company

In this guide we take a look at the process of transferring a lease contract for Limited Companies, otherwise known as a Novation.
NB: Novations are at the discretion of the finance provider. Please note, Nationwide Vehicle Contracts are unable to assist with Novation requests. To request a Novation quotation, please reach out to your finance provider direct.

What is a Novation?
A Novation is the movement of one vehicle contract from one Limited Company to another Limited Company. A Novation can also move one vehicle contract from a Sole Trader to a solvent Limited Company on an unregulated Finance Lease agreement only. With a Novation, the parameters of the original agreement (e.g. term, mileage and monthly rentals) as well as the contract type remains the same.
A Novation applies to unregulated Contract Hire or Finance Lease agreements only. Both Limited Companies (existing customer and new company) must also be solvent to request a Novation.
A novation agreement involves three parties:
- The original lessee – typically the business who originally took out the lease.
- The new lessee – the new business taking over the lease.
- The finance provider – the finance company who financed the agreement.
Under novation, all rights and responsibilities of the lease are transferred to the new lessee. This includes:
- Monthly payments
- Maintenance and insurance responsibilities (if applicable)
- End-of-contract obligations
There are many reasons why a Novation may be required. In most cases, a Novation is required because the existing customer (Limited Company) has been bought out by another Limited Company and the assets need to be moved across. Another reason may be because the driver of the vehicle has moved jobs and it has been agreed between the existing customer (Limited Company) and the new customer (Limited Company) to also move across the lease vehicle.
“One of the main reasons for a novation is when a company has been bought out by another, and the assets need to be transferred across.”

- The contract must be transferring from one Limited Company to another Limited Company. Limited Companies include LTD, LLP and PLC.
- There is more than 12 months remaining on the contract.
- Both companies (existing and new customer) must be solvent.
- The contract type must remain the same.
- The current contractual agreement must not be in default.
- The address on the documentation for both existing and new customer must match the address on Companies House.
- Two signatures (2 Directors or 1 Director and 1 Company Secretary) from each company will be required.
- The new customer must have been credit approved before a Novation is requested.
No because this option is not available with all funders. A Novation is at the discretion of the finance provider.
A Novation will also not be provided where:
- The vehicle has less than 12 months to run on the contract.
- The vehicle is in an extension
- The vehicle has outstanding debt
- The Novation agreement has not been completed in full.
- The customer goes into liquidation or administration while the process is being carried out. If this happens the Novation will be cancelled and the information passed to the finance provider's collection team.
A Novation offers many advantages for both the existing contract holder and the new lessee.
Advantages of a Novation:

No early termination fees
A Novation allows you to exit the terms of your lease contract early without paying hefty early termination fees.

Known vehicle history
The new lessee gets to drive an almost new vehicle with a known vehicle history and the balance of the manufacturer's warranty.

No initial rental fees
The new lessee does not need to pay an initial rental as required with a new lease, as all the upfront costs have already been covered.

Contract parameters stay the same
The contract term, monthly rental, annual mileage and contract type remain the same, allowing the new lessee to take advantage of the original car lease deal.
As with every type of contract amendment, a Novation may not be suitable for everyone, so be sure to consider whether this option is right for you.
Disadvantages of a Novation:

Case-by-case consideration
The option for novation is at the discretion of the finance provider and is not available with every finance provider.

Eligibility restrictions
You must meet certain criteria to be eligible for a Novation, including financial eligibility.

Time-consuming
The Novation process can be time-consuming, taking up to two months to complete from start to finish.

Admin fees apply
You will need to pay an administration fee to request a Novation. These costs vary between finance providers but average at around £500 inc. VAT per novation.

Check responsibilities
It is essential to check if you still hold any responsibility for the car or payments after the novation has been agreed upon. If so, early termination may be a better option for you.
If you have a question regarding a Novation or want to know more about eligibility or the process involved, contact the Nationwide Vehicle Contracts team on 0345 811 9595 (option 4) or visit our Motoring Guides section to view other options available to you.
Guide Information
Originally published: 21st June 2016
Last updated: 17th April 2025