How to Lease a Car for Business

Are you looking into a company car lease? The following steps detail how you can lease a car through your business. 

1. Narrow your list of potential candidates 

Whether shopping to buy or lease a car, you should consider what you want. When it comes to business, determining how you’ll use the vehicle can help you narrow your choices. Here are a few questions you can ask yourself to kickstart your brainstorming session: 

• What is your monthly budget? 

• How often do you want to drive a new vehicle? 

• What type of car are you looking for? (Do you need an electric vehicle, a pickup, a cargo van, or a sedan?)

• How will you use the car? (Will you deliver products, carry tools and supplies, or meet prospective clients to discuss business?)

• How many business miles vs. commuting miles will you drive annually?  

• How long do you want to lease a car? 

Take as many brainstorming sessions as you need to outline what you’re looking for in a business lease. You can use this as a guide in the next step. 

2. Understand what’s involved in a car lease

Lease agreements include several car lease terms you should be familiar with before you sign on the dotted line. Understanding these car lease terms can help you determine the costs of leasing a car for business and how to negotiate your lease for lower monthly payments. Brush up on your lease term knowledge and write down a few parameters you’re looking for in a potential lease agreement, including what money factor you want to target. 

3. Shop for car leasing deals

Finding the best car lease deals for your business requires comparing rates and fees between several leasing companies and dealerships. You can consult with a lease broker to find deals that suit your needs. If you want to research deals independently, contact the business sales division directly, as they can assist with business car leases. 

It can be easy to cut a few corners to meet your monthly budget requirements, especially regarding mileage. However, you should consider the mileage limits with each lease deal carefully. The last thing your business needs is an out-of-commission company car that can’t be driven because it’s too close to your mileage limit. 

4. Test-drive cars and leasing companies

Investigating the cars you want to lease in person is also a good idea. As you visit with dealership representatives and discuss details, keep a notebook. Verbal agreements are challenging to enforce, but if the rep shows you a car you might not have considered, it could be worth looking into when you’re back in front of your computer. 

5. Negotiate the lease

When you’ve picked a car you want to lease, sit down and hash out the details with the business sales rep. Don’t be afraid to mention that a positive partnership could result in continued business. Depending on your business size and what market you serve, you may even be able to negotiate a marketing partnership.   

6. Gather the necessary documents and apply

Once negotiations have settled and you’re ready to get the ball rolling, most dealerships and leasing companies require you to submit information about you and your business. Some of the most common documents you’ll need include: 

• Business tax returns

• Financial statements

• Bank and trade references  

Leasing companies may require new businesses without established credit to have a personal guarantee. If you own the business, you can use your credit history to vouch for the business if the business cannot make monthly payments. Though it can open up your personal assets to the leasing company should the business default, it’s a common way to establish business credit. 

If the leasing company requires a personal guarantee, they often have that person fill out a separate application. Like an application for an individual lease, you must meet the eligibility requirements for the business to lease a particular car. 

7. Sign your new lease

Once you’re approved for the lease, it’s time to prepare to take possession of the car. Review the lease agreement to ensure the rates, fees, and terms reflect what you negotiated. Take your time scanning through the fine print and ask any questions you might have as you go through it with the sales rep. 

When you sign your new lease, you must also pay the fees due at signing and make a down payment potentially. Ask for copies of any receipts so you can turn them over to your accountant. Make a note of any accessories the lease car includes to ensure they’re in the car before returning the lease. 

Many business owners overlook the insurance requirements necessary for a business lease. Some leasing companies set their insurance requirements higher than the minimum state requirements, so keep this in mind as you quote out insurance. You should also get the contact information of a representative from the dealership who can help you with any questions or concerns. 

8. Claim lease tax deductions

If you drive your leased or financed vehicle more than 50% of the time for business, you can use it as a tax deduction. The method you use to deduct your expenses varies depending on whether you lease or buy. Each business typically finds that one method suits its situation better. 

If you’re unsure how to claim your lease as a business tax deduction, seeking professional advice is best. Speak with your accountant to find out what you need to do during the year to track expenses and mileage so you can claim your car lease tax deduction come tax time.

The benefits of leasing vs. buying a car through your business depend on several factors. It’s best to lease a car through your business if you don’t have a lot of capital built up, don’t want to customize the vehicle, and want to drive the latest models to impress your clients. Warranties typically cover most maintenance costs during a lease, so avoiding these fees by leasing can also help a business pay less upfront. 

However, buying a car through your business also has several advantages. You can customize the vehicle to your heart’s content, own the car once you’ve paid off the loan, and you’re not limited to specific yearly mileage. You are responsible for maintenance but don’t have to pay the disposition fees incurred in a lease. 

Here’s a side-by-side comparison showing the cost of leasing vs. buying a 2023 Ram ProMaster Cargo Van through your business: 

Note that these calculations are somewhat simplified to illustrate the short-term costs of leasing vs. buying a vehicle. Though you pay a lower monthly fee to lease a Ram ProMaster, you end up paying less for the car if you finance it. Depending on the lease terms you agree to, you may be able to purchase your leased Ram ProMaster upon termination of the lease. However, some leasing companies may not offer a lease buyout option. 

When you compare leasing vs. buying vs. subscription costs, you may find that subscribing to a car can cost you less and still give your business the flexibility it needs. Car subscription services like FINN help you build a dynamic fleet and select the car(s) you want. FINN ensures rapid delivery, assigns a dedicated fleet specialist to answer your questions, and offsets carbon emissions to boost your business’ sustainability.