Business Car Purchase vs Lease

Buy or Lease Your Business Cars? Let's Chat About What Makes Sense 

So, you need a car (or maybe several) for your business, and you're stuck in that "buy vs lease" loop. I've been there! It's a bit like choosing between buying a house or renting – both have their perks, and what's right totally depends on your situation. 

Let me walk you through this in plain English, with some real examples I've seen work (and not work) for businesses just like yours. 

What's the Difference, Really? 

Before we dive into the nitty-gritty, let's get clear on what we're talking about: 

Buying is exactly what it sounds like – the car becomes yours, either by paying for it outright (not ideal for cashflow) or through finance. You own it, for better or worse, till death do you part...or until you sell it. 

Leasing is more like a long-term rental. You pay monthly for 2-4 years, drive around in a nice new car, then hand it back and get another one. No commitment issues here! 

Why Leasing Might Be Your Business's Best Friend 

Keep That Cash Flowing 

One of the biggest headaches for any business owner is cash flow, right? Leasing is brilliant because you're not dumping a huge chunk of money upfront. 

Did you know that most businesses in the UK fail because of cashflow, not because they are unprofitable. If your money gives you a better return elsewhere, then you might be better off putting it there and don't tie it up in an asset if you don't need to. 

Budgeting Made Simple 

With leasing, you pay the same amount every month. No surprises, no sudden "the timing belt needs replacing" moments that cost you a fortune. Just regular, predictable payments you can factor into your business budget. 

If it is your car we're talking about, your time is better spend on the business, not taking your car to get repaired. If we're talking about your staff, their time is better in the business, dealing with tasks that make the business money, rather than – you guessed it – dealing with care troubles. 

Tax Perks That Make Your Accountant Smile (rare) 

Now, I'm not an accountant (and you should definitely chat to yours about your specific situation), but there are some tasty tax benefits with leasing: 

• If you're VAT-registered, you can usually claim back 50% of the VAT on your lease payments (100% if it's exclusively for business use, like a van) 

• 100% of the VAT on maintenance (if you include it). 

• The whole lease payment counts as a business expense, so it reduces your taxable profit. 

The New Car Smell... Every Few Years 

Let's be honest – turning up to client meetings in a shiny, modern car makes a good impression (unless you're in a 911, that might give them the wrong idea). When you lease, you're always driving something relatively new, with the latest tech and safety features. 

Would you take on a company to manage your marketing if they turned up in a beaten up, 20 year old car?  

Depreciation? Not Your Problem 

Cars lose value faster than ice cream melts on a hot day. When you buy, that depreciation hits YOUR pocket. When you lease, it's the leasing company's headache. 

Because vehicles lose their value over time, this can drag down the company’s net worth on the balance sheet, as the car will be listed as an asset that continuously loses value. 

When Buying Makes More Business Sense 

Leasing isn't for everyone, though. Here's when buying might be the smarter move: 

You Want an Asset on Your Books 

Once you've bought a car outright (or paid off the finance), it's yours. No more monthly payments eating into your business profits. 

Freedom to Make It Your Own 

When you own a car, you can adapt it however you like. Need to add a roof rack? Permanent signage? A complete custom interior? Go for it – no one's going to charge you for modifications when you return it. 

High Mileage Drivers Rejoice 

If you're clocking serious miles, buying often works out cheaper in the long run. Lease agreements typically charge extra if you go over your agreed mileage allowance, which can add up quickly. 

Tax Benefits of a Different Flavour 

When you buy, you can claim capital allowances, which let you deduct some of the car's value from your profits before tax. This is especially generous for electric cars right now. 

Going Electric? Special Considerations 

Electric cars are shaking things up in the business vehicle world. The tax perks are pretty impressive right now: 

• Benefit-in-Kind rates are super low for electric cars (just 2% for 2025, then 1% increase each year until 2028), which is amazing if you or your employees use the car personally too. 

• You can claim 100% of the cost as a capital allowance in year one if you buy an electric car outright. 

• Charging costs at business premises are tax-deductible. 

One of our customers owns an estate agency and switched his whole fleet of ICE cars to electric last year. "The savings on fuel alone are massive, but when you add in the tax benefits, it's a no-brainer." 

So, What's Right for Your Business? 

Here's my rule of thumb based on what I've seen work for different businesses: 

Leasing probably makes more sense if: 

• You're keen to preserve your cash flow 

• You like having a new car every few years 

• The car's appearance matters for client impressions 

• You do moderate mileage 

• You're VAT-registered 

Buying might be better if: 

• You want to eventually eliminate monthly payments 

• You'll keep the car for many years (6+) 

• You need to heavily customise the vehicle 

• You do very high mileage 

• You're happy to deal with selling it later 

Real Talk: What I've Noticed 

After chatting with loads of business owners over the years, it really boils down to cost. Most of the time, if a lease deal is good and the car is fit for purpose, then why not? It is one less thing you need to worry about, so you can spend time on what actually matters in your business. 

Want to chat about what might work best for your specific situation? Drop us a line – we love helping business owners figure this stuff out with no pressure or jargon. Seriously, it's what gets us out of bed in the morning... we really need to get out more!