When searching for your next vehicle, one of the most important decisions is whether personal car leasing or business car leasing is the right option. Both lease types offer unique benefits depending on your circumstances, and understanding the key differences can help you secure the best leasing deal. In this guide, we’ll compare personal leasing and business leasing to help you make the right choice.
What is Personal Car Leasing?
Personal car leasing – often called Personal Contract Hire (PCH) – is a flexible and affordable way for individuals to drive a brand-new car without the long-term commitment of ownership. With a personal lease, you pay an initial rental followed by fixed monthly payments over an agreed period. Once the contract ends, you simply return the car.
What is Business Car Leasing?
Business car leasing, officially known as Business Contract Hire (BCH), is a cost-effective solution for companies and self-employed individuals. With a business lease, organisations can fund vehicles for work purposes, benefiting from predictable costs and potential tax advantages, especially if VAT-registered.
Do You Have to Be VAT Registered for Business Leasing?
No, VAT registration is not required to apply for business car leasing. However, if your business is VAT-registered, you may be able to reclaim a portion of the VAT on your monthly payments and car lease maintenance packages, making your business lease even more cost-effective.
Who is Eligible for Personal Car Leasing?
A personal lease is ideal for anyone over 18 with a valid UK driving licence and a satisfactory credit rating. Personal car leasing is perfect if you’re looking for a new car for everyday use, such as commuting, school runs, or family travel.
Who is Eligible for Business Car Leasing?
A business lease is available to:
- • Limited companies
- • Sole traders
- • Partnerships
- • Limited Liability Partnerships (LLPs)
- • Self-employed professionals
To qualify for business car leasing, you’ll typically need to provide proof of trading history, such as recent bank statements or filed accounts.
Key Differences Between Personal and Business Leasing
While both personal leasing and business leasing follow a similar structure, the key differences lie in who the lease is for and how the payments are handled. Business leases may offer tax advantages for eligible businesses, whereas personal leases are designed exclusively for private individuals.
What Are the Tax Benefits of Business Leasing?
One of the biggest advantages of business car leasing is its tax efficiency. If VAT registered, you can reclaim up to 50% of the VAT on cars used for mixed purposes and 100% of the VAT on vans used solely for business.
Monthly payments on a business lease can also be treated as a business expense, potentially reducing your taxable profits.
To learn more, visit our Business Car Leasing Guide.
Can I Use a Business Lease Car for Personal Use?
Yes, you can use a business lease vehicle for personal journeys. However, this may trigger Benefit in Kind (BIK) tax charges. The amount you pay in BIK depends on the car’s CO2 emissions and value. Opting for an electric car lease can significantly reduce your BIK tax.
Does Leasing Include Insurance?
No, insurance is not included with either personal car leasing or business car leasing agreements. You will need to arrange fully comprehensive insurance before delivery.
For added peace of mind, explore our Car Lease Maintenance Packages to cover routine servicing and maintenance.
What Happens at the End of a Lease?
At the end of both personal lease and business lease agreements, you return the vehicle to the finance company. Providing the car is within the agreed mileage and meets fair wear and tear guidelines, there will be no extra charges, and you can upgrade to your next lease.
Is Personal or Business Leasing Cheaper?
The most affordable option depends on your situation. If you’re a business user, particularly if VAT-registered, business leasing may work out cheaper due to tax relief. For individuals, personal leasing offers fixed costs and flexibility without the need for business status.
What Are the Mileage Limits?
All personal car leases and business car leases come with an agreed annual mileage allowance. If you exceed this, you’ll pay an additional charge per mile. If you’re unsure of your required mileage, contact our team for guidance.
Advantages of Personal Car Leasing
- • Affordable monthly payments
- • Access to brand-new vehicles
- • No large upfront costs
- • Simple and flexible contracts
Advantages of Business Car Leasing
- • Potential tax savings
- • VAT reclaims for eligible businesses
- • Keeps vehicles off your balance sheet
- • Access to the latest models for your team
Yes, business leasing is available for sole traders and self-employed individuals, provided you can show proof of trading.
Typically, you’ll need proof of identity, address, and business financial documents, like bank statements or recent accounts.
Not as standard, but you can add a maintenance package to cover servicing and wear and tear.
No, once your personal lease or business lease agreement is in place, it can’t be transferred. However, we can help you arrange a new lease to match your updated needs.