The main difference between a business vehicle lease and personal vehicle lease is that a business vehicle lease is in the name of your business and to be used for work purposes, whereas a personal vehicle lease is for personal use only and can not be used for business. There are some instances where you can get a business vehicle lease that allows for some personal use but this will then become a benefit in kind (BiK) to the user and the business can not claim back the full VAT. In this article we will explain what both personal and business vehicle leases are, the advantages & disadvantages for both and what the ultimate differences between them are.
What is a business vehicle lease?
A business vehicle lease or BCH (business contract hire) as it can also be known, is a long-term rental agreement where a business/company pays a fixed monthly fee for use and returns the vehicle at the end of the contract, usually after a 3-year period but contracts can vary between 2-4 years. At the end of the contract, an individual can opt to purchase the vehicle but the business can not.
What are the benefits to a business vehicle lease?
Business leasing can offer a range of benefits for SMEs, or large corporate companies including:
- More affordable: An ideal business vehicle for an affordable monthly cost.
- Smaller start up fee: No initial large cost to the business, ideal for newly established business.
- Lower cost: for businesses that require multiple vehicles.
- VAT Claim: Ability to claim back VAT if you are VAT registered.
What are the disadvantages to a business vehicle lease?
Whilst a business vehicle lease does have its perks, there are some drawbacks:
- No Asset to own: You never own the vehicle.
- Mileage restriction: Caps on mileage can result in penalty charges if not managed properly
- Termination Fees: Coming out of the lease early for whatever reason can result in a fee.
What is a personal vehicle lease?
A personal vehicle lease or PCH (personal contract hire) as it can also be known as is similar to a business vehicle lease but the contract is with an individual as opposed to a business. Similar to business vehicle leases PCH’s are usually for 3 years but contracts can vary between 2 – 4 years. At the end of a personal contract there is no option to purchase the vehicle.
What are the benefits to a personal vehicle lease?
Personal leasing offers a wide range of benefits including:
- Stay trendy: Being able to change the vehicle every 3 years or so in order to drive the latest models.
- Lower Start Cost: Avoid large upfront costs for the newer models.
- More affordable: Breaking down large price tags into affordable & managable monthly payments for working on a budget.
- Full Coverage: You can be covered in the case of an accident with maintenance and breakdown cover.
What are the disadvantages to a personal vehicle lease?
Similar to a business vehicle lease, there are some drawbacks to a personal vehicle lease:
- No Ownership or Equity: You will never own the vehicle.
- Restrictions on Mileage: Annual mileage can not be exceeded without paying a fee.
- Damage to the vehicle: “fair wear and tear” guidelines need to be met, anything after that may incur a charge.
What’s the difference between Business and Personal Leasing?
As stated above, there are a lot of similarities in the two options including the benefits and drawbacks of both, however, there are some difference between to the two that can help support you making the right decision for you:
| BCH | PCH | |
| User | A VAT Registered business. | An Individual |
| Tax Benefits | Businesses can reclaim up to 50% of VAT on payments and 100% on maintenance; costs can also be offset against corporation tax. | Unable to claim VAT or tax relief. |
| Usage | Can be used for business and personal use (this will affect tax reclaim). | For personal use but can be used for business purposes providing you have the correct insurance. |
| Contract | In the company’s name. | In the individual’s name. |
Whether you are looking at personal (PCH) or business (BCH) lease you’ll be able to choose terms that suit you, such as the length of the lease, initial rental period and the annual mileage.
- The length of the lease will determine how long you will have the car for, before returning it back to the leasing company.
- The initial rental period will be the first payment you make towards the vehicle and is outlined underneath the lease cost on our deals pages.
- The annual mileage will allow you to select how many miles you think you will travel and will be set as your limit. If you travel more than your mileage limit, you may be subject to excess mileage charges.
By choosing a vehicle on a personal lease or business vehicle lease, you can avoid some of the large upfront costs you have to face when buying the vehicle outright. You also may already own a vehicle for personal use and would like a second vehicle for business use.
At Vavoom, we pride ourselves on providing top business and personal leasing deals on a wide range of brands and models. We understand that monthly rental costs can be far more affordable for some than upfront costs, which is why we aim to offer lease deals on as many models as possible, to help you drive your dream car.
From leasing agreements with maintenance packages and breakdown cover, to custom mileage restrictions, our deals are customisable to you, to ensure your needs are met. Get in touch and start your new vehicle journey today!
