How to choose a car to lease for your business

Choosing a car to lease for your business is a different exercise from picking one to buy. You are not deciding what you want to own. You are deciding what you want to use for a fixed period, how much you will drive it, and what it needs to do for the business.

Business contract hire is a long-term rental. You pay a regular monthly amount for a set term and an agreed annual mileage, then hand the car back at the end. You never take ownership. This guide covers the main choices and the checks worth making before you commit.

Swiss Vans Ltd, which runs contracthire.tv, is a credit broker and not a lender. We introduce businesses to finance providers, and any agreement is subject to the provider's own checks and terms.

The options

Most business leasing decisions come down to a handful of choices.

Fuel type. Petrol, diesel, hybrid, plug-in hybrid and fully electric cars are all available on contract hire. Which suits you depends mainly on your typical journeys. Short, local trips with somewhere to charge tend to suit electric cars. Regular long motorway runs may suit a diesel or an efficient petrol or hybrid. Your tax position also differs by fuel type, so it is worth asking your accountant.

Body style and size. A small hatchback is easy to park and cheap to run. An estate or SUV gives more room for equipment, samples or passengers. A saloon or executive model may matter if you meet clients in the vehicle. If you carry heavy loads, consider whether a van is the better fit.

Term and mileage. Terms commonly run from two to four years. Longer terms usually spread the cost out, while shorter ones let you change vehicle more often. Annual mileage is fixed at the start, so estimate it carefully.

Maintenance. Some agreements include servicing, tyres and breakdown cover for an extra amount. Others leave maintenance with you. Including it makes budgeting simpler, but compare what is actually covered.

Who will drive it. A car used by a director, a sales team member or a shared pool will have different needs. If it is a company car for an employee, benefit-in-kind tax applies to them.

What to check

Before signing, work through these points.

• Realistic mileage. Going over the agreed mileage normally leads to excess mileage charges at the end. Paying for more mileage than you need also wastes money. Look at past business mileage if you have it.
• Initial rental. Many agreements ask for an upfront payment, often expressed as a number of monthly payments. Check how much it is and how it affects the monthly figure.
• End-of-contract conditions. The car must be returned in fair wear and tear condition. Ask for the provider's standard and any charges for damage.
• Early termination. Ending a contract early can be costly. Check what the terms say before you agree.
• What is included. Confirm whether road tax, maintenance and breakdown cover are in the monthly amount.
• Tax and VAT. The VAT and corporation tax treatment of leased cars has particular rules, and they vary with emissions and business use. Take advice from your accountant.
• Delivery and lead time. Stock and build times vary. If you need the car by a set date, ask early.
• Your business status. Providers will look at your company's circumstances. Sole traders, limited companies and partnerships may be assessed differently, and acceptance is never certain.

Next step

Start by writing down the basics: who will drive the car, the likely annual mileage, how long you need it, and any must-haves such as boot space or an electric powertrain. With that list, you can compare vehicles and terms more clearly.

When you are ready, contact contracthire.tv with your requirements. We can look at the options with you and, where appropriate, introduce you to finance providers. Any agreement depends on the provider's checks and terms.

Questions people ask

Can I lease a car through my limited company?

Yes, business contract hire is designed for limited companies, and it is also available to sole traders and partnerships. The finance provider will carry out its own checks, and we cannot promise acceptance.

Do I own the car at the end of the contract?

No. Contract hire is a rental, so you return the car at the end. If you want to own a vehicle, a different type of finance may suit you better.

What happens if I drive more than the agreed mileage?

You will normally be charged for excess mileage when the car is returned, at the rate set out in your agreement. It is best to estimate your mileage carefully at the outset.

Is an electric car a good choice for business leasing?

It can be, particularly if most journeys are predictable and you can charge at a base or at home. Check the range against your typical trips and ask your accountant about the tax treatment.