Personal and Business Car Leasing Explained

Cars can be leased for both personal and business use. The type of lease agreement you buy will be partly dependent on how the vehicle is used and whether it will be for private use only or be available to a business and their employees. Personal and business lease are similar in how they work, but they both have some key differences that will make you choose one over the other. Both are lease contracts in which you'll drive the vehicle but not own it for the duration of the lease. You'll pay monthly instalments to cover the cost of the vehicle and once your agreement is finished you'll return it to the leasing company. Read our full guide to car leasing for more information how leasing can work for you.

How does business leasing work?

Volvo driving on the road on a business lease

Business contract hire (BCH) is a type of car leasing agreement that allow a business to lease vehicles for use over an extended period of time. Business leasing is available to any commercial enterprise regardless of size. So you can lease a single vehicle as a sole trader or lease a fleet of vehicles as a national business. Business leasing is available if you are a limited company, partnership, LLP, charity or a sole trader.

As with any lease deal, the business will not own the car for the duration of the contract. They'll pay a non-refundable deposit and pay fixed monthly leasing fees for the duration of the contract before returning the vehicle when it ends.

The lease will be funded and registered through the company so there are additional tax benefits to business leasing that aren't available with personal contracts. If the car lease is registered through a VAT registered company then the business can claim back 50% VAT on the monthly leasing payments and 100% back on the cost of any maintenance packages they'e purchased also.

How does personal leasing work?

Lime yellow Volkswagen driving on the road on a personal lease

Personal leasing, or personal contract hire (PCH), is similar to business leasing except it caters for individuals not leasing a vehicle through a business. A personal lease is for personal use only and is not financed by a company but by an individual.

Both PCH and BCH contracts work in the same way with a deposit, monthly payments and the vehicle returned at the end of the contract. But unlike a business contract hire, a personal lease holder is not able to claim VAT back on their payments like a business can.

You can purchase optional maintenance packages that tie in the cost of servicing and repair works with your monthly payments. This can help cover the cost of any unexpected maintenance, servicing and repairs. Alternatively you can enter a customer maintained contract where the lease holder is responsible for financing vehicle maintenance as and when it's needed.

Your lease contract will outline a mileage limit that's agreed between the lease holder and leasing company. This can be anywhere between 10,000 to 40,000 miles (or more), which is a limit for the duration of the contract. If you go over this limit you'll be charged at a additional rate per mile, which you'll have to settle with the leasing company at the end of the contract. At Stoneacre Leasing you can use our interactive leasing calculator to customise a lease deal so you have a mileage limit that suits your needs of the vehicle.

Personal vs business leasing

You might have the option to either lease a vehicle through your business or to cover the lease yourself. If you are not authorised by your business to register a lease through them then you may have no other choice than to lease with a personal contract hire.

Both personal and business contracts offer the same benefits of leasing: fixed monthly instalments and the opportunity to drive new cars, plus no resale or asset depreciation concerns that you can have with ownership. Neither will give you the option to buy the car at the end of the contract, so if you want the flexibility to be able to own the car consider a personal contract purchase. Personal contract hire (PCH) is not the same as personal contract purchase (PCP). For a comparison between PCH and PCP contracts read our leasing vs PCP article.

The main difference between personal and business leasing is the tax benefits afforded to business lease holders who can claim VAT back on their leasing fees. Personal lease holders are required to pay VAT like they do on any other payment, which means that a like-for-like lease deal would be more expensive if its a personal contract hire than it would be if it was a business lease. However, business leasing is only available to companies and only VAT registered companies can claim money back. So unless you are looking to lease a company car you will have to lease with a personal contract.

Stoneacre leasing offers both personal and business leasing contracts so you can find a complete range of options available to cover you for your next vehicle lease. Lease packages can be tailored to your requirements, with maintenance packages that will cover servicing and repair costs for the duration of the lease, and flexible contracts to suit you and your lifestyle.