What You Need to Know about Leasing a Car Through Your Business


If you’ve decided that leasing is right for you, you may now be asking yourself whether you should lease a car via a personal contract or a business plan. Business Contract Hire (BCH) is the preferred upon method for businesses to finance their vehicles, through a Personal Contract Hire (PCH) works very similar. Lenders like Cars4Leasing offer both types of agreements and, while both operate on a minimum down payment and an set annual mileage for the contract, there are some important exceptions when it comes to the subject of reclaiming VAT.

Monthly Structure

In both BCH and PCH agreements, the deals are normally structured over a two-to-three year period. You’ll typically see these kind of deals advertised as 3+23 or 3+35 contracts. This is because you’ll pay the first three payments in advance, in the form of a deposit, then the further 23 payments or 35 payments over the rest of the agreement. In a PCH, the prices should always be displayed including VAT. Both sets of customers will return the vehicles to the finance company at the end of the agreements. Any damage must be repaired prior to return, as in line with the lender’s fair wear and tear policy, or this will be charged in addition to the contract.

Mileage Allowances

Mileage allowances, again, work the same across the two formats. These are agreed upon in advance, with the minimum of 10,000 miles per annum and maximum of 40,000 per annum. Last year, the average annual mileage in the UK was 7,900 miles so the minimum allowance is designed to give you some leeway in case your driving habits change over the course of the contract. If you exceed the agreed upon amount, you’ll be charged at an excess mileage rate to be billed at the end of the contract.

Reclaiming VAT

The biggest distinguisher between the two types of agreements is in the amount of VAT you can reclaim. Leasing a car under a BCH or PCH deal allows you to reclaim 50% of the VAT. However, if you can provide sufficient evidence that the vehicle is to be used only for business, and not private use, you may be able reclaim all of the VAT. BCH customers may also be able to reclaim VAT associated with fuel costs, business related running and maintenance costs, and any extra equipment fitted to the vehicle as long as it’s intended for professional use only. Each approach is intended for a specific type of customer. Speak with your lender so you know which agreement will suit your needs the best. Either way, business or personal the options for performance and high end vehicles still exists.

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