Marcus Richards
Starting your own business requires a lot of expenses, so having a company car may not be a top priority. You should, however, give it some serious consideration. Even though there are many used cars available that would be ideal for your startup’s needs, leasing a business car or fleet makes sense financially.
Budget car leasing allows your startup to put resources towards more important aspects of the business, such as expanding, acquiring new equipment, or training employees. A startup may be seen as a “high-risk” customer by banks and other financial institutions. Your company should be eligible to lease a vehicle if it has sufficient trade experience and can prove that it can afford monthly payments.
Who Can Apply for a Business Car Lease
Businesses can lease vehicles through a business contract hire (BCH) agreement, including,
- Limited Companies
- Sole Traders
- Partnerships
- Limited Liability Partnerships (LLPs)
- Public Limited Companies (PLCs)
- Charities
- Embassies
- Registered VAT businesses
What Are the Requirements?
Credit checks will be conducted by finance companies funding vehicle leases. Since it involves reviewing the bank account and director’s information, it may be a concern for new businesses. The reason is that they don’t have much revenue and expenditure to show for their efforts. Those who started their company less than a year ago will need to provide additional or supporting documentation.
What are the details and documentation required for a business car lease?
The following information must be provided by all businesses to finance companies before leasing a vehicle.
- Name, address, company registration number, and company’s yearly revenue.
- An overview of the director’s background and qualifications.
- The company’s bank details include the bank’s name, the account number and the sort code.
Supporting Documentation
A finance provider will likely ask for additional information if your startup company has been established for less than two years.
Among these are:
- Business bank statements or audited accounts for the past three months
- Accounting records
- Directors’ guarantees are agreements that promise to pay the monthly rent if the company’s finances can no longer support them.
In the absence of the above information, likely, you will not be approved for the lease financing required. You will probably have to pay a higher interest rate if you do so.
What Are the Benefits of Leasing a Car for My New Business Lease?
New businesses can benefit from leasing in three ways.
Affordability
Maintaining solid levels of cash flow is essential for any business. Although paying outright for a car is an option, it immediately depreciates once taken out on the road. You will also likely have to make sacrifices regarding your cash flow if you buy a car second hand.
It is often far more cost effective to lease a car than to buy it upfront because you are only committed to it for a fixed period. The initial payment of the lease is usually determined by the amount of money you wish to spend. You maintain control over your cash flow while maintaining flexibility over your business’s finances in the short and long term.
Saves Time
Making your startup successful takes up a lot of time, especially in the early stages. The time it takes to compare specs, deals, and prices on various websites can be challenging to find when looking for a car or fleet.
When you work with someone like Lease Loco, you simply have to fill out a form online and make an inquiry. This service saves you time, and you can easily find a vehicle based on your specifications.
Tax Benefits
Business car leasing comes with significant tax benefits as well. If you take out a contract-hire car, you can claim the VAT back on the initial rental and monthly payments. However, you must be a VAT-registered company to benefit from this.
Other tax benefits may be available if the vehicle is used exclusively for business purposes. The lease payments may also offset your monthly tax bill depending on how much carbon dioxide your car emits, and your tax may be refunded to you based on the CO2 emissions of your vehicle.
Final Thoughts
Depending on your startup’s needs, you may want to look into car leasing as an alternative to buying. Negotiating a fair contract with affordable monthly payments and an appropriate mileage allowance is possible. This is if you can determine the type of lease most suitable for your needs.
At the end of the day, car leasing should help your company’s bottom line and save you money as you grow. You can find more startup tips and content at https://beststartup.eu/.
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