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Should I lease a car personally or through my business?

May 20, 2019 | News

Car leasing and contract hire continues to grow in popularity, Car & Van Finance Direct investigate whether you may be better placed to opt for personal leasing or business leasing for your new car!

Car leasing

Personal contract hire car deals have been common for a quite a while, with buyers able to select their annual mileage, length of contract and driving a new car without having to pay for depreciation in the long term. Businesses are now doing the same, leasing fleets of cars and vans to offer to their employees through company car schemes. Smaller businesses and sole traders have also considered car leasing as an alternative to purchasing vehicles for business purposes, but is it better to opt for personal leasing or business leasing?

Business car leasing

Many business owners will make the assumption that leasing a car through their business is the most cost-effective and best way of driving a new car. Business leasing deals can tend to be more affordable as if you are leasing the car through a VAT registered company then you can reclaim 50% of the VAT of the monthly payments and all of the VAT of the maintenance agreement. You’ll obviously have to pay company car tax, however this can be cheaper than personal car tax in many cases so savings can also be made here.

Car leasing is also good for cash flow, it frees up cash in the respect that you don’t have your money tied up in an asset which will only depreciate over time. Financial commitments of a business leasing agreement are ‘off the balance sheet’, meaning they don’t have to be included in your company accounts which can also be an attractive benefit to business owners.

Personal car leasing

If you want to opt for personal leasing rather than business leasing, then you may enjoy some benefits that business leasing doesn’t offer. The first of these is that you can use the car freely for both personal and business use without worrying about incurring any company car tax. If you opt for business leasing, you will have to pay company car tax if you use it for personal journeys which include travelling to and from your place of work.

To avoid paying any company car tax you would need to leave your car at your business location overnight and use a personal car to travel to and from work. If you do opt for personal leasing you won’t have to pay company car tax, however you would have to pay the VAT in full, rather than have it reclaimable by your business.

One of the most attractive factors about personal leasing is that you get to drive a brand new car every 2 or 3 years. You never own the car, however you don’t have an asset which is depreciating in value with each mile that you travel. You can also tend to afford a much more luxurious car if you opt for leasing over outright purchase.

What should I do?

There are advantages and disadvantages to opting for private or business leasing and which is the better option for you depends completely on what you want from your car. If you want a car that emits high CO2 figures and has a high P11D value, then personal leasing is probably the best option for you, as you’ll avoid paying large sums in company car tax.

However if hybrid or electric vehicles are more your cup of tea, then it may make more sense to opt for business leasing as you’ll pay far less company car tax and will be able to make further savings through VAT.

There are benefits to leasing both personally and through your business, it really depends on what you are looking for from your car.

New cars on finance

Looking for car leasing? Look no further! Car & Van Finance Direct have a massive range of brand new cars available and car leasing for both personal and business users available. Simply fill in a contact form or call us on 02920 789234 to get the ball rolling today!