Business Car Leasing Requirements Explained

A car lease is similar to a long-term rental. You're paying a monthly fee to use the car, for a predetermined time. The length of a car lease is usually two to four years. But, with a car lease, you have to follow a set of rules laid out in a contract. It’ll typically include a limited amount of miles you can drive, you’re not allowed to add personal modifications to the car, and you have to keep up with the necessary car maintenance. When your car lease wraps up, you've got a few options - return the car, buy it, or simply start a new lease.

When businesses lease a car, they also enter a contract for a fixed term. Just like with a normal car lease, the lease length of a business car is typically for two to four years. But instead of buying the car outright, the business pays a monthly fee to use it. This is often an attractive option for businesses because it allows them to always have access to the latest car models without the upfront costs and depreciation worries associated with ownership. It's mainly used for work purposes and can come with potential tax benefits too.

There are many types of businesses that let you lease a business car: 

• Sole Proprietors – If you own a business, you can start leasing your car through it. 

• Limited Partnership (LP) or Limited Liability Partnership (LLP) –  LP and LLP are business structures that involve at least one main partner with an unlimited liability (responsibility) and one partner – or more – with limited liability.

• Corporations – Small and large corporations can lease cars for executives or employees, so they can use them for business-related travel. Sometimes, corporations provide their employees with a leased car for personal use. 

• Non-profit organizations – These entities are able to lease cars for their business use as well, especially if they require transportation for their operations. 

• Limited Liability Companies (LLCs) – An LLC is another type of business structure that combines the pass-through taxation of a partnership with the limited liability of a corporation. They can also lease cars for business purposes.

It’s quite common for S Corporations (S Corp) to lease a vehicle for business use. When an S Corp is leasing a car, the monthly payments for it are usually considered as business expenses and can be deducted from the corporation's income. If you use the car for your personal trips and not just for business, you might have difficulties in deducting the full amount of the lease from your taxes.

The Internal Revenue Service (IRS) has very complex rules regarding vehicle leases. Even more when it comes to deciding between personal use and business use. Ask a tax professional or accountant to understand the specific requirements for your situation.

If you want a fleet of vehicles for your company now, then you should pick a FINN car subscription from FINN. Get your new company car in just four simple steps, as FINN for business offers even more benefits to fleet customers.

It can speed up the process if you have all of your necessary paperwork ready when leasing a business car. Continue reading to get an idea of the main documents you will most likely need. Just keep in mind that different leasing companies  might ask for different documents. This depends on the contract and the kind of business car lease. 

Proof of identification 

You need to provide a valid identification document. The place you're leasing from might ask for things like your birth certificate or social security card just to make sure it's really you.

Proof of income

You need to prove that your company makes enough money to cover the monthly payments. This means providing income statements, tax returns, or bank statements to demonstrate that your business earns enough.

Proof of business address  

You typically need to provide proof of your business's address. That can include a utility bill (such as electricity, gas, water, internet) in the business's name that works best. Phone bills are usually not accepted. Make sure the utility bill shows the business's current physical address where the leased vehicle will be located. Most leasing companies require the proof of address  to be dated within the last one to three months to prove it is current. Older bills may not be accepted.

If your business is new, you may need to provide a signed lease agreement or mortgage statement listing the business's address. If the utility bills are not in the business's name, you may need to provide alternate documents linking the business to that address, such as a tax document. Some leasing companies may accept a bank statement as alternate proof if it lists the business's physical address.

Proof of insurance

You need to provide evidence of a valid auto insurance policy. The institutions want to see that your business has continuous and full coverage of all of your vehicles during the full length of the leasing period. 

Business documents

You need to provide some documents that show that you have a business. Documents such as a business license, articles of incorporation, Employer Identification Number (EIN), etc. This verifies that you are leasing the car for legitimate business purposes.

Leasing a vehicle is a good option for new businesses that do not have the budget right now to buy one. But there are specific eligibility criterias and requirements that can vary among leasing institutions. Some require a minimum time in business or specific financial documentation. You should contact the leasing institutions directly if you want to know about their specific policies for new businesses.

Before a leasing institution makes the decision as to whether you qualify for a business car lease, they will conduct credit checks. You should at least have a business credit score of 700, if you want to lease a car for your business. With a score of 700 – or above – you will have the best chance of being approved for favorable lease terms. Some companies may even lease to businesses with lower credit scores. That can depend on the cost of the vehicle, the down payment, and other credit or contract terms. Keep in mind that these requirements can vary between leasing companies.

You should consider the pros and cons when leasing a car for your business. The two biggest benefits are having new cars more often and lower monthly payments. The down payments are oftentimes lower as well, and there is a great manufacturer’s warranty and covered routine maintenance. The latter will save you a lot of money on small repairs. Plus, you can write off a leased car and get some serious tax deductions. Another very important plus for leasing is that you do not have to deal with the sale or disposal of the vehicle once you are done. 

For drawbacks, you’ll have to pay for extra miles if you’re going over the agreed limit. You also have to pay a big fee if you want to exit the lease early. Also, you won’t be able to depreciate the value of a leased car at tax time since you never actually own the vehicle. When you’re leasing, you’re also not allowed to make any modifications to the car. 

If you want the best car leasing deals for your business, you should pick a car subscription from FINN. A FINN car subscription for your business is a much more flexible alternative to traditional leasing, where you get to drive a new car without the hassle of ownership. You can choose your dream vehicle in a few minutes, subscribe to it for six or 12 months, and even have insurance and maintenance included.