Learn about electric vehicle leasing
Here we aim to educate you about the world of leasing which will help you better understand your options when looking to lease an electric vehicle.
Types of Leasing Contracts
Learn more from the ev LEASING specialists
Electric Vehicle Leasing
Business Contract Hire (BCH) & Personal Contract Hire (PCH)
what is it?
Business Contract Hire (BCH) (also referred to as Business Leasing) or Personal Contract Hire (also referred to as Personal Leasing) is where you lease the vehicle for a set period of time. You make an initial rental then fixed monthly rentals for the remainder of the contract term. At the end of your lease period, the vehicle is handed back to the finance company.
How does it work?
Choose your vehicle
Select your term
How long you would like to have the vehicle
Select an initial rental
Annual mileage
Tell us your expected annual mileage
Your monthly rental is then calculated taking the following into consideration:
- The cost of the vehicle,
- The contract period,
- Your expected annual mileage,
- The number of initial rentals you put down, and,
- The anticipated residual value of the vehicle (how much it’s likely to be worth at the end of the contract which is determined by the finance company)
What happens next?
Pay the initial rental
Pay your fixed monthly rentals
Vehicle Maintenance
Maintain the vehicle in accordance with the manufacturers guidelines
Return your vehicle
Hand the vehicle back to the finance company
Advantages of Contract Hire
Why this option could make sense to you
- Vehicles are often the latest model and covered by the manufacturers new-car warranty.
- As the vehicles are new, you are driving them during the most trouble-free years.
- Leasing enables you to potentially drive a higher-priced, better equipped vehicle than you would have been able to afford if purchasing.
- You benefit from having all the latest safety features.
- Choice of term and initial payment profiles.
- The risk of depreciation lies with the finance company, so you don’t have to worry about a potential drop in value.
- Vehicle Excise Duty (VED) also referred to as Road Fund Licence (RFL) or Road Tax, is included for the duration of the contract.
- You don’t have the hassle of trying to sell it – it gets handed back to the finance company at the end of contract.
- Optional maintenance packages available.
Additional advantages of Business Contract Hire
- If you’re a VAT registered business, you may be able to claim up to 50% of the VAT paid on the finance element for cars and generally 100% for commercials.
- If you take a maintenance plan, the VAT on the service element is 100% recoverable.
- The finance company reclaims the VAT on the original purchase, which reduces your monthly rentals.
What you need to be aware of with Contract Hire
- You will not have the option to own the vehicle at the end of contract, the finance company remains the registered owner and keeper throughout the term of the contract and there is no option to buy it.
- Excess mileage charges - If you go over the agreed mileage, you will incur additional excess mileage charges which are calculated on a ‘pence per mile’ basis.
- If you travel less than your agreed mileage, there is no reimbursement for unused mileage so it’s important to ensure you calculate your planned annual mileage as accurately as possible, so you are not overpaying in terms of either monthly rental or excess mileage charges.
- As the vehicle does not belong to you, you cannot make any modifications or sell it.
- You are liable for any damage to the vehicle therefore it’s important to ensure you maintain it in good condition, in line with manufacturers guidelines.
- If you decide that you no longer want the vehicle and want to terminate the agreement early, you will incur penalties in the form of early termination fees which can be extremely costly.
- If you fail to make your repayments, the finance company can repossess the vehicle.
Finance Lease
What is it?
A Finance Lease is a form of flexible leasing to fund the use of a vehicle, it is only available to business customers, i.e., limited companies, self-employed people, and sole traders. It is ideally suited to VAT registered businesses and can be structured with or without a balloon payment.
- The asset (i.e., the vehicle) remains the property of the finance company (lessor), while you (lessee or customer), receive exclusive use of the asset, paying for its hire over a set primary (monthly) period followed by a secondary (yearly) period
- You can reclaim 50% VAT on finance rentals for business and private use (e.g., company cars) or 100% of VAT on rentals when used for business use only (e.g., company vans) subject to your VAT recovery rate
- Rentals in a Finance Lease are based on interest being added to the price of the vehicle excluding VAT, and the balance (less any balloon payment) is paid over a fixed time
How does it work?
Pay an advanced rental followed by a fixed number of monthly rentals over an agreed contract period
Choose to either:
Entire cost
Pay the entire cost including any interest charges monthly
Lower instalments
Pay lower monthly instalments with a final payment based on the resale value of the vehicle at the end, otherwise known as the balloon payment
At the end of the lease, dependent upon the terms and conditions set out in the agreement you can either:
Sell on
Sell the vehicle to a third party, allowing your business to benefit from any available equity if it's sold for profit
Balloon Payment
Pay the outstanding balloon payment and operate the vehicle under a 'peppercorn agreement', also known as a secondary rental agreement
Vehicle returned
If an extension is not required, the asset will be returned to the finance company, normally to be sold on
Advantages of finance lease
- Fixed monthly lease rentals.
- A residual value can be applied to lower monthly rentals, (balloon payment).
- Tax deductions are available when the vehicle is used for business purposes.
- Opportunity to benefit from potential profit on disposal.
- Possibility for you to extend the agreement if this option is available with your finance provider.
- Transfers the majority of the "risks and rewards" of ownership to the lessor/finance company.
What you need to be aware of with Finance Lease
- Throughout the agreement, the vehicle remains the property of the finance company.
- There are potential cost implications if you terminate your agreement early.
- You bear any residual value risk.
- You are responsible for the maintenance and servicing of the vehicle whilst in your possession, however in some instances, a separate maintenance contract may be available.
- There are no mileage restrictions, however, lenders may impose certain restrictions on the use and location of the vehicle and any additional mileage covered may affect the residual or re-sale value.
Leasing Vs Buying
Leasing a vehicle is often cheaper than buying a new car as it generally comes with a lower monthly payment.
Leasing is particularly good for those who like a brand new car every few years, or want to drive the latest newest vehicles for the lowest cost.
Looking to lease an Electric Vehicle?
Contact one of our leasing specialists today or check out our sister company site for the latest online deals.
