Personal VS business vehicle leasing – what’s the difference?
So, let’s start by defining what vehicle leasing is. Essentially, it’s the long term rental of a new vehicle, and there’s two options to choose between: personal and business vehicle leasing (or contract hire as we call it here at Summit Vans). They’re both pretty similar in terms of their processes, but there are some key differences between the two, which we’ll outline below.
First things first, personal car or van leases are for private use, whilst business car or van leasing enables companies to hire new vehicles for work purposes. But whether you’re leasing a vehicle for personal or business use, an upfront deposit will be required and then monthly instalments thereafter for a set period. The higher the initial deposit, the lower the monthly repayments and remember: these payments don’t go towards owning the vehicle. At the end of the lease agreement, the vehicle keys are returned. And there’ll be nothing additional to pay, provided you’ve stuck to the pre-agreed annual mileage and kept the vehicle in good condition. When your lease agreement ends, you’ll make the final monthly repayment and will then have the option to start a new lease with a brand-new vehicle!
Who is responsible for the lease agreement?
If you take out a personal car lease, then the leasing company will run a credit check to ensure you personally can afford the monthly repayments on the vehicle. It’s very likely you’ll need to provide the following details: photo ID, proof of address, bank details and your employment/income details. Unlike personal car leasing where it’s the individual’s name on the paperwork, if it’s the company leasing a vehicle, then they’ll be responsible for signing all of the paperwork and making the payments.
Are there any differences in tax benefits between personal and business leasing?
If you take out a personal car lease, you’ll have to pay VAT (value added tax) on top of payments you make each month. Businesses who lease cars or vans are able to claim back at least 50% of the VAT paid on the lease unless they are able to prove that the vehicle is solely used for business purposes, in which case they can claim back 100% of the VAT.
Are there any differences between mileage on a personal car lease and a business car lease?
It doesn’t matter whether it’s a personal or a business lease, any and all contracts will come with an annual mileage limit. If you go over the agreed annual mileage limit, then there will be a fee to pay (for example, a 10p charge for every mile over the agreed limit). Annual mileage limits are often higher on business leases than they are on personal leases. This is because company cars or commercial vans tend to do a lot of travel up and down motorways as part and parcel of the job. The mileage will vary from deal to deal, but the maximum is generally 40,000 miles a year. It’s also worth noting that the higher the annual mileage, the higher the monthly repayments too.
How long can you lease the vehicle for?
One of the benefits that comes with leasing a vehicle is flexibility when deciding the length of the contract term. The majority of lease contracts are for either two and three years, but it’s also possible to arrange deals for four years and even five years. At Summit Vans,alongside our more traditional contract hire agreements, we also offer a 12 month flexi-lease agreement with no long term commitments and a range of quality, high-spec vans to choose from. So at the end of the 12 months, you can either return the vehicle and reclaim your deposit (providing the vehicle isn’t damaged), or jump into another brand new van for another 12 months!
In summary, whilst personal and business vehicle leasing are very similar, they do differ when it comes to tax benefits, annual mileage limits and whether the lease agreement is with you as the individual or with the business. Here at Summit Vans, we offer lots of business leases and even personal leases, and we are passionate about getting our customers in the right van with the right funding package. So if it’s a contract hire or flexi-lease you’re interested in, why not talk to one of our super friendly team members today?