Why does business leasing appear cheaper than personal?

You’ll likely notice a price difference between business and personal leasing when exploring your lease options. Both have a similar process, requiring an initial payment and annual mileage from the outset. But what about the cost?

Business leasing deals appear cheaper because the lease is taken out on behalf of a company, which comes with certain VAT and tax benefits. We’ve looked at why this is the case and what factors typically affect the cost of a business lease.

Is it cheaper leasing a car through a business?

Leasing through a business is a cost-effective way to source new vehicles. However, it is worth bearing in mind that you may not see the cost benefits straight away.

For example, if the lease car is used for business purposes only and is kept on-site, it can be treated as a 100% tax deductible asset. Your monthly payments will remain the same compared to personal leasing, but you’ll be able to claim back some of the VAT.

The amount of VAT reclaimable depends on vehicle usage and a business’s individual circumstances. We’d suggest keeping track of your business mileage, as this will dictate your VAT and tax benefits.

How much does business car leasing typically cost?

A business lease typically costs between £200 and £500 per month, although this will depend on the make and model of the vehicle chosen. The cost of a business lease also varies depending on the initial rental, annual mileage, and contract length selected. Find an example of a BMW i5 business lease below, where a 9-month initial rental and 5000-mile yearly milage have been chosen over a 2-year contract.

The above figure was accurate at the time of writing (March 2024)

Business lease deals change regularly and are dependent on the availability of the cars offered. For an accurate quote, we always recommended contacting our team directly.

What factors can make business car leasing appear cheaper?

The main factors that make business lease deals appear cheaper include:

• The ability to claim back VAT on business travel (e.g. 50% business use would equate to 50% VAT reclaimable, and this is normally the standard calculation as HMRC assume some personal use of a company car).
• A full tax return on fuel for mileage that is business-related.
• Any advertised personal lease deals have VAT included in their monthly payments.
• Certain vehicle manufacturers may offer additional terms and discounts for companies with fleets. This can be for businesses with as few as 5 company cars, so it’s worth speaking with your Account Manager to understand if we can secure additional manufacturer support.
• From time-to-time certain vehicle manufacturers offer preferential pricing for businesses, which is why there may be occasionally discrepancies between business and personal pricing.

Tips to help you save money on your next car lease

If you’re still considering a business or personal lease, we’ve put together a trio of tips to help you save money on your next car lease deal.

It’s worth thinking about the total cost of driving a vehicle, not just the monthly payments. For example, fuel costs versus electric charging; lower benefit-in-kind tax on electric vehicles versus petrol and diesel company cars.

• Consider the contract length – choosing a shorter lease will help reduce expenses and the number of monthly payments you have to make. Synergy also offers short-term leasing for customers who don’t want to commit to a standard contract.  However, choosing a 4-year contract may mean that the monthly payments are slightly lower compared to a 2-year contract as you are paying to lease the vehicle over a longer period. However, the number of payments will be higher.
• Choose an electric car – electric lease deals can help drivers save money on petrol and diesel costs. For business lease customers, they also offer the lowest benefit-in-kind tax rate as of 2024/25.
• Opting for a maintenance plan –  leasing with maintenance helps protect against any unexpected maintenance costs. The additional cost of the plan becomes part of your normal monthly payments and helps cover things like mechanical failings, MOTs, and servicing.
• Look out for stock special offers – Leasing brokers have access to special stock deals, which are frequently vehicles bought in bulk by one of our finance providers, which means the discount is passed on to the customers through preferential leasing rates.  These vehicles may have a fixed specification as they have already been built, but usually offer great value for both business and personal customers.

If you’d like to find out more about a business or personal lease, get in touch with our team, who can guide you through the leasing process.

This article should be used as a guide only. ‘Why does business leasing appear cheaper than personal?’ is for information only and is subject to change. Information is supplied by a third party, and Synergy accepts no responsibility for errors in the data. Please contact us if you wish to receive a quotation. Eligibility criteria, terms & conditions apply. You will not own the vehicle. Vehicles are subject to availability. You should verify this information with your tax adviser or accountant before proceeding with your contract.