New Business Car Lease

Can my new business lease a car?

There's good news if you're a new business. Any company, no matter how long it has been trading, can apply to lease a car.

The main types of organisations typically accepted for business leasing include:

• Limited Companies (Ltd.)
• Public Limited Company (PLC)
• Self-employed/sole trader
• Partnership
• Limited Liability Partnership
• VAT-registered and non-VAT-registered companies

Charities and even embassies are also eligible. This shows that there are few barriers to business owners applying for a leased car. However, there are some exemptions, such as taxi leasing.

Due to the use of the vehicle, many finance companies don't accept this type of agreement, so a specialist company dealing with this type of lease may be able to assist.

To find out more, check out our guide to business leasing.

How do I qualify for a business car lease?

For a new business to qualify for leasing, the company and directors may have to go through a credit check.

This is to verify that you will be able to continue making the payments throughout the contract. It will involve the finance company reviewing your company history, including past payments and any public legal filings, seeing how long you have been trading.

In most cases, you need a good to excellent credit score to pass a credit check. There may be some instances where the finance company will request further evidence about the financial status of the business. This will vary depending on the company performing the checks, but if you cannot produce the required documentation, it is unlikely you will successfully secure the lease.

What documents do I need for a business lease?

To apply for a business lease, finance companies will generally ask for the following information:

• Company details – name, address, company registration number (if applicable), contact number and email
• Director's information – name and date of birth, sometimes address details may be required
• Business bank details – bank name, account number and sort code

For businesses less than two years old, additional documents may be required, such as:

• Three months of bank statements
• Management accounts or up-to-date financial statements
• Director's guarantee - only applies to Limited Companies

What do I do if I don't have the documents?

As a new business, you might be unable to provide your accounts. In this case, the finance company may ask for additional documents, such as a realistic cash flow forecast.

We have a specialist funder for new start businesses and other unique business structures – please ask your Account Manager for details.

How can I improve my chances if I have a new business?

All car lease applicants undergo credit checks. In most cases, you will need a good to excellent rating on your credit check. However, there may be some elements that can help your application further, such as:

• Shorter leases – business leases typically last between two and four years. If you opt for a shorter term, this may help your application, as there is a reduced risk to the finance company
• Higher initial rental payment – your first payment is made up of between one and 12 months of monthly instalments. If you pay more in your initial payment, it may support your application
• Having a guarantor – guarantors take responsibility for the monthly payments in the event of defaults. In a business case, you, as the owner, may be able to act as a guarantor, so you personally take responsibility if the business fails to make payments

How long does it take to build enough credit for a new business lease?

The length of time it takes to build credit in a new business differs depending on company circumstances. In most cases, it can take up to two to three years to make a healthy credit file. However, during this time, it's essential to start taking steps towards building this.

Can I improve my credit score with a new business?

There are several ways to start improving your credit score. Some of the main factors to consider include:

Pay suppliers on time – ensure your business suppliers are paid on time to help give your business a credit background

Make sure personal accounts are healthy – your personal accounts may be used as a reference when applying for credit in the early days. So, make sure they are free from defaults

Keep your bank balance in the black – always ensure there is enough money in your account, and stick within agreed overdraft limits

Use a business bank account – open a specific business account for your company so you can provide financial documents if required

Avoid CCJs – severe defaults such as CCJs will negatively affect your credit score

Only apply for credit when needed – credit applications appear on your credit report. So, avoid making several applications in a short period and only apply for finance when necessary

Use supplier references – if you’re applying for finance in the early days of trading, supplier references may help secure funding. This can give finance companies an idea of your relationships with suppliers

Always file financial accounts on time – companies that are required to file accounts to Companies House should make sure these are filed on time. It’s also helpful to file full statements to give credit agencies a better view of your position.

Why should I lease a car for my new business lease?

Leasing offers a variety of benefits for businesses, such as:

1. Cost-effectiveness

Every business needs to maintain strong levels of cash flow. While paying for a car outright is an option, the moment you take it out on the road, it is a depreciating asset. Your cash flow will also take a significant hit if you buy a brand-new car outright.

By leasing, you are only committed to the car for a fixed period and the monthly payments often prove cheaper than paying upfront for it.

In most cases, leasing lets you decide how much money you want to commit to the initial payment. This leaves you in control of your cash while ensuring you maintain flexibility over your business finances in the short and long term.

If you take advantage of our maintenance package, you also get the benefit of spreading all servicing and MOT costs, which further aids cash flow.

2. Time-saving

Running your own business, especially in the early stages, means your time is primarily spent trying to make it successful. If you need to invest in a car or fleet, it can prove challenging to find the time to go through various websites comparing specs, deals and prices.

Working with someone like Leasing Options means all you have to do is make an inquiry and complete some paperwork. We do all the hard work for you based on your exact requirements, taking any stress away from the situation.

We will assign you a dedicated Account Manager to help and guide you through the leasing process.

3. Tax benefits

Another great incentive is the tax benefits that come with new business car leasing. Taking out a contract hire car will enable you to claim back an element of the VAT on both the initial rental and monthly payments. However, this only applies if you are a VAT-registered company. If the car is used purely for business purposes only, there may be other tax benefits available.

Check out our business car leasing benefits guide for more information.