Finance your fleet with business vehicle leasing

Leasing commercial vehicles enables your business to access high-quality cars, trucks, and other vehicles at a lower upfront cost. Rather than investing in long-term ownership, you can simply return the vehicle at the end of a leasing agreement and seek out a brand new car for your next lease. 

When considering whether a business car lease deal is suitable for your business, it’s essential to weigh up the different financing options available to you. 

What is commercial vehicle leasing?

Commercial vehicle leasing is the process of renting a vehicle solely for business use. 

Unlike personal vehicles, commercial vehicles are managed and maintained by your business. When building a fleet of commercial vehicles, you can choose between either buying or leasing the vehicles.

Buying commercial vehicles can be a significant investment for your business. If you don’t have substantial working capital to either buy the vehicles outright or cover the costs of car payments, establishing ownership in this way may not be a realistic option.

By comparison, leasing a commercial vehicle enables you to access newer vehicles without the upfront cost. With a commercial vehicle lease, you agree to pay a set monthly amount in exchange for a set period of use, typically ranging between two to five years. At the end of this period, you return the vehicle to the leasing company and can choose to lease a new vehicle if needed. 

Additional terms of a commercial leasing agreement often include:

• Mileage restrictions or limitations

• Maintenance requirements

• Vehicle condition requirements upon return

What are the benefits and risks of commercial vehicle leasing?

Leasing commercial vehicles comes with both benefits and risks that are important to consider before signing on to a leasing agreement. 

The benefits of commercial vehicle leasing include: 

• Simplified vehicle expenses: Leasing a commercial vehicle can simplify your vehicle expenses. Rather than budgeting for long-term ownership and maintenance of a commercial vehicle fleet, you can instead budget according to the fixed duration of the lease term.  

• Lower-cost asset acquisition: Acquiring physical assets like commercial vehicles can place a hefty toll on your finances. Commercial vehicle leasing often imposes lower monthly payments compared to purchasing a vehicle outright or having to make a monthly car loan payment. 

• Tax advantages: Depending on where your business operates, you may be eligible for a variety of tax benefits that can help lower your monthly and annual costs. In the UK, for instance, some payments may be tax deductible and if you are VAT registered you can reclaim a portion of the VAT paid on car lease payments. 

However, commercial vehicle leasing can still present risks to your business. These risks may include:

• Mileage restrictions: Most leasing companies impose mileage restrictions on commercial vehicles, as these vehicles can lose value as they climb higher in total mileage. If your business team travels frequently, these restrictions may limit your use of a leased commercial vehicle. 

• Maintenance costs: Though you do not have ownership of a leased commercial vehicle, you still hold the responsibility for vehicle maintenance, repairs, and insurance. Factoring in these costs is essential for proper budgeting. 

• Leasing terms: The leasing terms you agree to may impose hardships on your business if you agree to a long leasing term or a payment you cannot consistently afford. Reviewing your leasing terms before signing any agreement is key. 

How can you finance a commercial vehicle lease?

When taking out a commercial vehicle lease, you must ensure you have adequate working capital to cover your monthly payments. Additionally, it’s important to consider the tertiary costs of maintenance, repairs, and insurance that come with commercial lease vehicles. 

Asset finance is a specific type of business lending designed to help companies like yours access assets such as commercial vehicles and other physical equipment or technology. Please note that asset finance typically requires an upfront deposit and there is less flexibility with early repayments. Here’s an overview of the different types of asset finance you can leverage for leasing a commercial vehicle: 

• Operating lease: An operating lease (also called a business contract hire BCH) allows your business to rent an asset for a fraction of the asset’s life cycle. Operating leases are often the most common type of asset finance used for commercial vehicle leasing, offering a set monthly rental period and fixed payment amount. At the end of an operating lease, the leasing company expects the return of the asset.  

• Finance lease: A finance lease (also called a capital lease) allows your business to lease a car for a set period. In a finance leasing agreement, your business selects the asset and the leasing company purchases it and lends it to you at a set monthly cost. At the end of the leasing agreement, you can either dispose of the vehicle through an asset disposal process or pay the remaining value of the asset to establish permanent ownership. 

• Hire purchase: A hire purchase is a type of credit agreement in which you agree to a fixed monthly payment in exchange for access to an asset, such as a commercial vehicle. In a hire purchase agreement, there is a set number of instalment payments that must be made rather than a set leasing period. Once the final payment instalment is made, you legally own the vehicle.   

Who is eligible for commercial vehicle lease financing? 

Asset financing for a commercial vehicle lease can be a viable option for all types of businesses, including small businesses and startups. When seeking out asset financing for a commercial vehicle lease, key factors lenders look at can include: 

• Borrowing and credit history

• Available working capital and liquidity

• Assets owned by your limited company that can be used to secure a loan

• Business bank statements from within the last 90 days

Even if your business has bad credit or a limited borrowing history, you can still qualify for unsecured loans. However, it is important to note that unsecured loans often include more stringent requirements, as well as higher monthly repayments and interest rates than a standard business car leasing contract. 

How to apply for commercial vehicle lease financing

At Funding Options by Tide, we work with businesses of all sizes to obtain financing. If you’re looking for car lease deals in 2024, Funding Options by Tide can connect you with more than 120 lenders across the UK to find a suitable solution for your business needs. 

Get started with Funding Options by Tide today. 

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business and personal credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.

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