Security may be required. Product fees may apply. Finance is only available for business purposes.

Office equipment and vehicle fleets are all worthy investments for your business – and can help your firm deliver and achieve more of its goals. But sometimes, you might not have the downpayment available to buy them. 

With a business lease, paying for cars, vans or other business essentials is more manageable. You’ll pay a rental sum each month and use the asset whenever you need it for an agreed period. At the end, you’ve got options – you can either return the asset, replace it, or keep renting. 

You can take out a lease for all sorts of things. You might need one for delivery vans or company cars. Alternatively, you might need one for heavy-duty vehicles like forklifts, catering equipment or factory machinery. They can be used for office equipment too – like laptops, monitors and printers. 

Whatever you need a lease for, it will generally fall into two categories. 

Finance lease

With a finance lease or capital lease, you’ll pay the full cost of the asset, with interest, over an agreed timeframe. There are benefits and risks for both sides. The leasing company covers the downpayment for the asset (if applicable) and leases it back to you over an agreed period of time.

You’ll need to keep up with the monthly payments and interest, but you’ll get the economic rewards of the asset. This is a good option for items that’ll be useful for a long time – such as machinery. With leasing, however, ownership of the asset will not be passed on to you, even at the end of the lease term.

Lease with a residual value

A Lease with a Residual Value – sometimes called an operating lease – is a more straightforward variant. Here, you’ll lease an asset for a shorter period and then return the item once you’re done. Alternatively, you can continue to lease if you’d like to use the asset for longer. You may also have the option of upgrading the asset under a new lease.

This type of lease can be useful for items with shorter lifespans or depreciating value, such as vehicles. 

Business car leasing, often known as contract hire, can in some cases work slightly differently from other types of leasing. Here’s what the process could look like overall:

1. Advance Rental and Monthly Fees: You start by paying an advance rental, followed by a fixed rental fee each month. The lease term typically ranges from 24 to 48 months, but it can be adjusted to suit your needs.
2. Mileage Agreement: You’ll need to estimate and agree on the number of miles you plan to drive the vehicle each year.
3. End of Lease: At the end of the lease term, you simply return the car and hand over the keys. There are no additional payments required. If desired, you can easily upgrade to a new lease deal.

Business car leasing may be a valuable option for those who want the benefits of driving a new vehicle regularly without the commitment of ownership or the concern of depreciation. Monthly rentals are agreed upon in advance, providing financial predictability and convenience.

Before you decide on a business lease, it’s a good idea to weigh up the pros and cons. Here’s what to watch out for. 

Pros

• Flexibility. With a business lease, you can access expensive vehicles and equipment without having to pay for them outright.
• Rental payments. With spread out monthly payments, you’ll have more liquid cash to play with in your everyday operations. You may be claim back VAT on your payments, if you’re VAT registered, further lowering costs.
• Offsets. You can also offset your rental payments against profit. The asset doesn’t appear on your balance sheet. 

Cons

• Ownership. When you’re leasing an asset, you don’t own it. This means you may face certain restrictions on how you use it. 
• Payments. To maintain the lease and keep possession of the item, you’ll need to make regular payments as agreed. The asset could be reclaimed if the event of missed payments.
• Maintenance. Even when you don’t own the asset, you may have certain liabilities for maintenance, mileage and usage. It’s worth looking at the small print carefully to make sure you’re happy with the terms and conditions.

At the end of a business lease, you’ll have a series of options. Often, these will depend on the sort of business lease you have.

• For a finance lease: When you’ve finished your final payment, the lease comes to an end and you hand back the asset. However, you also have the option to continue leasing the asset, usually at a nominal value, or sell it to a third party on our behalf, where you’ll be entitled to a percentage of the sale proceeds.
• For an operating lease, you will normally return the asset. From there, you’ll often have the option to take out a new lease if you need an upgraded asset. You can also continue to lease or rehire the asset. With two end-of-lease options to choose from, you get increased flexibility in how you manage your assets: return the asset to us for sale or rehire the asset.
• With a business car lease or contract hire, you’ll hand back the vehicle at the end of your term. If you’re upgrading, you can get your new wheels at the same time. 

Leasing could be a great idea for your business – but it’s important to do careful research first.  Check out our guides to:

• Leasing
• Contract hire

What is the difference between a business lease and a hire purchase?

The main difference between a business lease and a hire purchase is ownership. With a lease, the asset is owned by the business – at least until the leaser has submitted their final payment. With a hire purchase, ownership transfers to the business hiring the asset. 

Who is responsible for insuring a leased vehicle?

For a business car lease, the vehicle should be insured by your business. The company should supply letters and policy documents to the registered driver. If you are leasing the vehicle yourself, then it’s your responsibility to take out your own comprehensive insurance.

Do you need good credit for a business lease?

Most leasing companies require a good or excellent credit rating to offer a lease. However, you may be able to lease a vehicle with a lower rating, depending on your circumstances.