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When you run a business, your ultimate goal is to make a profit. One essential step towards this is to reduce your expenses as much as possible. However, companies have needs, and you may find that your business activities require an electric vehicle and you decide on a new electric car. One way to get a hybrid vehicle and still manage expenses is to take out electric car leasing. As such, you may decide that leasing electric vehicles is in your business’s commercial best interest. This article will, therefore, explain what an electric car lease for a business is.
What is an Electric Car?
An electric car is a car powered partly or entirely by electricity by plugging it in to charge the car’s battery. This means the car’s fuel intake is either nil or less than a standard car. There are three main types of electric vehicles. These are:
- entirely electric (BEVs), which use only a battery, so they run only on electricity;
- a plug-in hybrid (PHEVs), which uses a battery up to a specific mileage, usually 40 miles maximum, and then fuel; and
- conventional hybrids (HEVs) which have a tiny battery powered by electricity, which charges through the combustion engine and the regenerative braking.
How Do You Lease an Electric Car?
Leasing electric vehicles is a more straightforward process than you may think. With an electric car you pay a fixed amount each month to the lease company for approximately one to five years. The initial payment will be a portion of, for example, roughly a quarter of the entire lease price. The monthly payment will be the remainder of the price split between the agreed monthly lease period.
When someone decides to take an electric car lease for their business, they agree with the lease company to an annual mileage maximum for the electric car. This tends to be between 8,000 to 40,00 miles per annum. You should be careful not to exceed this, as you will pay an excess mileage charge, which your business may not have accounted for.
Who Can Lease an Electric Car?
Various legal entities can engage in leasing electric vehicles. Moreover, all legal entities lease electric vehicles in a similar fashion. For example, the following business types can lease an electric car. These include:
- limited companies;
- sole traders; and
- partnerships.
However, to be eligible, your business must be:
- currently trading;
- able to show that you have good profits; and
- are able to pass a credit check.
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Why You Should Lease an Electric Car?
There are many reasons why a business owner may choose an electric car lease for their business.
1. Buying Electric Cars Outright is Expensive
Electric cars are costly. It is unlikely that many companies can afford to purchase them outright. This means that many firms, such as yours, will, therefore, choose an electric car lease instead. In addition, car leasing also means that you can upgrade to a new model of an electric car sooner than you may have if you bought it.
2. Lower Vehicle Running Costs
An electric car lease for a business means lower running costs than an ordinary car lease, as you don’t pay any, or as much, for fuel. The cost to charge your car with electricity is substantially cheaper, saving your business money on running costs. You may even consider solar panels on your business premises to make the act of charging your electric car nothing. However, you will need to check that your commercial lease agreement for your business premises allows this.
3. Eligibility to Claim Back on VAT Paid
With an electric car lease, you can also claim back your VAT for the electric car in terms of, for example:
- rent payments for the electric car lease;
- servicing costs; and
- mileage.
This makes an electric car lease a more attractive choice for your business. However, you must note that you can only legally claim back your VAT for using the car for business purposes. Therefore, if you use it for personal and business use, the portion of personal use will reduce your VAT reclaim amount.
4. Leasing an Electric Car is More Environmentally Friendly
Additionally, you may choose an electric lease for your car business because you are mindful of the environment. An electric car lease for a business means your business can lower its carbon footprint.
This cheat sheet outlines what you should be aware of in your lease agreement.
Key Takeaways
An electric car lease for a business is where you rent an electric car. You pay an instalment of the lease price upfront and the remainder in monthly instalments. The lease company will also agree to a mileage allowance with you as the business owner. An electric car lease is available to all business types if you meet the specific criteria. It is a way to make a new business vehicle financially possible, plus you can claim back VAT on parts of it. An electric car lease also helps to reduce your business’s carbon footprint.
If you need help understanding what an electric car lease is and whether it is suitable for your business, contact our experienced leasing lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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