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  • Feb 21, 2022

  • 5 min read

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What is a business lease?

Business car leasing or Business Contract Hire (BCH) is a type of lease that allows you to make savings on leasing an electric car through your business.

Business Contract Hire is when your company hires a vehicle from a leasing company - like Octopus Electric Vehicles - for an agreed period, paying for the car through monthly rental payments. The leasing company owns the vehicle and is responsible for the associated risk.

Business Contract Hire is a great way to switch to electric for your next company car. With savings to be made on Benefit in Kind, VAT and fuel, electric cars are both kind to your wallet and the planet.

What are the benefits of leasing an electric car through my business?

Here are some of the top benefits of leasing an electric car through your business:

VAT Relief

VAT registered businesses can claim up to 50% of the VAT back on the cost of the monthly lease and 100% of the VAT for maintenance costs.

Reduced Benefit in Kind tax

Benefit in Kind (BiK) tax can be as high as nearly 40% when you lease a petrol or diesel car through your business. With an electric car, the rate for BiK is currently just 1%. This rate is increasing to 2% in April 2022 and capped until 2025.

Good for the planet

Electric cars produce zero tailpipe emissions, so your carbon footprint quickly decreases when you switch to electric.

Savings on fuel

You can make significant savings on fuel cost when you switch to an electric car, especially when you switch to Intelligent Octopus, the energy tariff designed with EV drivers in mind. Super-cheap energy overnight means plugging in at home, charging when energy is at its lowest price and waking up to a topped up battery. Your car is ready to go when you are. No more waiting in line at the petrol station to foot an expensive fuel bill.

Low maintenance costs

Electric vehicles have a significantly lower number of moving parts compared to petrol, diesel or hybrid cars. When a car has an internal combustion engine it has thousands of moving parts. This means more opportunities for things to go wrong. Electric cars have only around 20 moving parts, making them much less likely to need repairs or replacements. Plus the batteries in most electric vehicles come with a warranty of 7 to 8 years.

Fixed monthly costs

You’ll always know what your monthly outgoings are with standardised fixed costs across the whole term of your agreement. You’ll never pay more than agreed at the start of your lease so you can budget easily.

No risk to the residual value

With electric cars being a developing technology, there is no certainty with the residual value as the market changes. At the end of the lease, you just give the car back to the leasing company so you don't have to include depreciation in your accounts.

How does business car leasing work?

Business Contract Hire requires an initial rental payment of either 3, 6, 9 or 12 months, and an ongoing monthly rental payment. The cost of your monthly payment depends on the make and model of the car, the mileage and the length of the agreement. To get an idea of costs, check out the business leasing example costs here.

Does my business meet the requirements for Business Contract Hire?

To take out a Business Contract Hire you must have a Limited Company that’s been operating for a minimum of 2 to 3 years with up to date accounts.

What are the key differences between Business Contract Hire and Salary Sacrifice?

Salary sacrifice is usually best for people who get most of their income from salary. Business contract hire is usually best for people who take most of their income from dividends like company directors and shareholders. Salary sacrifice comes with some excellent benefits like early termination protection, parental leave, end of contract damage waiver, long term sick protection and insurance.

Check out our guide on the difference between Business Contract Hire vs salary sacrifice.

We love helping businesses switch to electric. Our EV specialists will help you choose the right vehicle, source the best terms and funding and get you set up with smart tariffs for EV drivers so you can hit the road in your brand new electric car.