Business Car Lease vs Personal Car Lease

Business or Personal Car Lease? Let's Figure Out What's Best for You 

So you're thinking about leasing a car? Brilliant choice! It's a great way to get yourself behind the wheel of something shiny and new without the whole commitment of actually buying it. But now you're faced with another decision – should you go for a business lease or a personal one? 

I hear this question all the time, and the answer isn't always straightforward. Let me walk you through it like we're just having a chat over coffee, and hopefully by the end, you'll have a clearer picture of which way to go. 

The Basic Difference (Without the Jargon) 

Let's start simple: 

A business lease is when a company (could be your limited company, partnership, or even if you're a sole trader) takes on the lease. The car technically belongs to the business, even if you're the only person who drives it. 

A personal lease is exactly what it sounds like – it's in your name as an individual, just like your mobile phone contract or Netflix subscription. 

The actual leasing bit works the same way for both – you pay monthly for 2-4 years, hand the car back at the end, and that's that. No worrying about selling it or watching it lose value. The differences come in how they're set up, the costs, and those all-important tax bits. 

When a Business Lease Makes Perfect Sense 

The VAT Thing 

If you've got a VAT-registered business, this is where things get interesting. You can claim back some or all of the VAT on your lease payments: 

• If the car is only ever used for business (like a delivery van that never goes near a supermarket run or school pickup), you can claim back 100% of the VAT. 

• If it's mixed use (which let's be honest, most cars are), you can still claim back 50% of the VAT. 

•  And, if you've included maintenance, you can claim back 100% of the VAT on that, regardless to what it is used for 

A customer of ours, a photographer, saves about £70 a month this way on her Audi Q7. Over a three-year lease, that's about £2,500 – enough for a nice holiday (or some new camera gear)! 

Tax Write-Offs 

The monthly lease payments count as a business expense, which means they reduce your taxable profit. In plain English? You pay less tax. 

This is a big one for most customers. This and the VAT! 

Better Deals and Lower Costs 

Business leases often work out cheaper because: 

• The VAT savings we just talked about 

• You save on corp tax 

• Companies sometimes get access to deals that aren't available to individual customers 

I was chatting with a client recently who was shocked to find that the same Mercedes was £65 less per month as a business lease than as a personal one – before even factoring in the tax benefits! This is not always the case though, so double check.  

Keeping Things Neat and Tidy 

If you run a business, having the car as a company expense rather than a personal one makes your accounting much cleaner. No messing about with expense claims or working out what percentage of your personal car use was for business. 

My accountant practically hugged me when I switched from claiming mileage on my personal car to having a proper business lease. This is especially true as I'm leasing an EV through the business. 

When Personal Leasing Wins the Day 

No Business Required! 

The most obvious one – if you don't have a business, a personal lease is your only option! But even if you do have a company, sometimes personal is simpler...this might be true if the company is young or you trade at a 'loss' (*wink wink*). 

No Company Car Tax Headaches 

If you have a company car that you use personally (even just for commuting), you'll pay something called Benefit-in-Kind (BiK) tax. It's basically HMRC saying, "Hey, your company is giving you a perk, so you need to pay tax on it." 

This is because you are paying for a car with money that has not been taxed yet and benefiting from it – unlike a personal lease, where you spending money that has already been taxed. 

The BiK rates vary depending on the car's emissions – electric and low-emission cars have much lower rates than gas-guzzlers. This is why so many business users are switching to EVs these days. 

Without being dramatic, this is a make or break, as BIK can often outweigh the VAT and tax savings if you take a car with a high rate.  

Simpler Application Process 

Getting a personal lease is usually more straightforward. They check your personal credit score, income, and outgoings – standard stuff. Business leases involve looking at company accounts and financial history, which can be more complex, especially for newer businesses. 

This is not always the case though, businesses can just sail through if they have good trading history.  

Freedom to Use It However You Want 

With a business lease, especially if you're claiming tax benefits, you need to keep records of business vs personal use. With a personal lease, the car is yours to use however you please – no logbooks, no mileage records, no explaining to HMRC why you drove to the beach on a Tuesday. 

Which One's Right for You? Let's Sum It Up 

You might prefer a business lease if: 

• You have a VAT-registered business (hello, tax savings!) 

• The car will be used mainly for work 

• You're happy dealing with BiK tax if you use it personally 

• Your business has a good financial track record 

• You want to keep business expenses separate from personal ones 

A personal lease might be better if: 

• You don't have a business (obviously!) 

• You do have a business but use the car mostly for personal stuff 

• You want to avoid the complexity of BiK tax 

• Your business is new or doesn't have much financial history 

• You prefer a simpler application process 

Real Talk 

Let me share something from experience – the "right" answer often comes down to the numbers for your specific situation. What works for one person might be completely wrong for another. 

For example: 

• A high-emission luxury car used mostly personally? Personal lease probably wins. 

• A low-emission or electric vehicle used mainly for business? Business lease likely makes more sense. 

• A brand new startup without much trading history? Personal lease might be easier to get approved. 

• An established business where accounting simplicity is important? Business lease keeps everything cleaner. 

The best approach? Chat with your accountant (if you have one) before deciding. They can run the numbers for your specific situation and tell you which option will leave more money in your pocket at the end of the day. 

Not sure where to start? Drop us a line, and we can talk through your options without all the confusing jargon. We promise not to bore you with tax calculations unless you specifically ask for them (and even then, we'll try to make them interesting... somehow!).