Yes, and it’s more straightforward than you might think.
If you’ve just set up a limited company and you need a van, leasing is one of several options available to you. The fact that your company is newly formed does make the application process slightly more involved, but it doesn’t close the door. Lenders who work with new businesses assess applications differently to those who only want to see two or three years of accounts, and knowing which ones to approach makes a significant difference to the outcome.
Before we get into the detail of what lenders look for, it’s worth addressing something that catches a lot of new business owners out. When people say they want to lease a van, they don’t always mean the same thing. Leasing, finance, rental, and hire purchase are terms that get used interchangeably in everyday conversation, but they’re quite different products with different implications for your tax position, your balance sheet, and how much you pay each month.
If your accountant has specifically recommended a lease arrangement, it’s worth understanding exactly what that means and why. If you’ve just used the word lease because it felt like the right one, it’s equally worth understanding what your options actually are before you commit to anything.
This article covers both questions. What leasing actually means for a new limited company, and whether you can get it.
What do people actually mean when they say they want to lease a van?
It’s one of the most common points of confusion in business vehicle finance. A new business owner calls up and says they want to lease a van, but when you dig into what they actually need, it turns out they want to own it at the end. That’s not a lease, that’s hire purchase. The two products work very differently, and choosing the wrong one can affect your tax position, your monthly costs, and what appears on your balance sheet.
The word lease gets used loosely to mean anything that isn’t buying a van outright. In practice it covers several distinct products, and understanding the differences is worth a few minutes of your time before you speak to a lender or a broker.
Contract hire This is the closest thing to a straightforward rental. You pay a fixed monthly amount to use the van for an agreed period, typically two to five years, and hand it back at the end. You never own the vehicle, there’s no option to purchase, and depreciation isn’t your problem. It’s popular with businesses that want predictable costs and prefer to refresh their vehicles regularly. The monthly payments are usually lower than hire purchase because you’re only paying for the use of the van rather than working toward ownership.
Finance lease A finance lease is also a rental arrangement, but it works slightly differently. You rent the van for most of its useful working life, and at the end of the term you have the option to sell it to a third party and use the proceeds to settle any remaining balance, or in some cases purchase it directly for a modest fee. The van doesn’t appear on your balance sheet as an owned asset because technically you’re renting it. The full monthly rental payment can be offset against corporation tax, and VAT is charged on the monthly payments rather than on the full purchase price upfront. If you’re VAT registered you can reclaim that VAT as you go, which is better for cash flow than having to find the full VAT amount on day one.
Lease purchase This is where the confusion often starts. Lease purchase sounds like a rental but it’s actually a finance product that ends in ownership. You pay a deposit, make fixed monthly payments, and then pay a larger balloon payment at the end of the term to own the van outright. Because ownership transfers to you at the end, the van does go on your balance sheet, and the tax treatment is closer to hire purchase than to a finance lease. Many people who say they want to lease a van are actually describing something that works like lease purchase or hire purchase.
Hire purchase With hire purchase you pay fixed monthly instalments and own the van outright once the final payment is made. VAT on the full purchase price is paid upfront, though if you’re VAT registered you can reclaim it in your next VAT quarter, and some lenders will allow you to defer that VAT payment rather than paying it on day one. Because you own the asset, it goes on your balance sheet and you can depreciate it against tax and claim capital allowances. It’s the most straightforward route to ownership and the most commonly used structure for business van finance.
The right product depends on whether you want to own the van, how you want to treat it for tax purposes, and what your accountant recommends. It’s a conversation worth having before you apply rather than after.
For more information on obtaining van finance for a new business click here.
What do lenders look at when a new limited company applies to lease a van?
The challenge with being a newly formed limited company is that you don’t have the trading history that mainstream lenders use to assess risk. No two or three years of accounts, no established credit profile for the business, and possibly no track record of meeting financial commitments as a company. That’s what makes some lenders say no automatically.
The lenders worth approaching take a different view. Rather than dismissing a new company application outright, they look at a broader set of factors to build a picture of the risk involved.
The directors’ personal credit histories For a new limited company, the directors are the business in the eyes of most lenders. If the directors have a solid personal credit history, that carries significant weight. A director who has successfully managed personal finance commitments, mortgages, loans, or credit facilities, gives a lender confidence that the company is likely to be run responsibly. Conversely, if the directors have adverse credit on their personal files, that will need to be addressed and explained.
The nature of the business What does the company actually do, and is the van clearly connected to how it earns money? A new plumbing company applying for a panel van is a very different proposition to a newly formed holding company with no obvious trading activity. Lenders want to see a clear, credible connection between the vehicle being financed and the way the business operates.
The deposit available A meaningful deposit reduces the lender’s exposure from day one and demonstrates that the directors have some financial substance behind them. For new companies without a trading history, a reasonable deposit can be the single most effective thing you can do to improve your chances of approval. There’s no fixed rule, but anything upward of ten percent of the vehicle value is generally viewed positively.
The business plan and forward projections Some lenders will ask for a business plan or evidence of forward contracts and income. This is particularly relevant for new companies where there are no historic accounts to rely on. If you have signed contracts, confirmed orders, or any documentary evidence of future income, it’s worth having that ready before you apply.
The registration date How new is new? A company that’s been registered for six months is in a different position to one that was incorporated last week. Some lenders have minimum registration periods before they’ll consider an application. Others will look at the case on its merits regardless of how recently the company was formed.
How to give your application the best possible chance
If your company is newly formed and you’re planning to apply for van leasing or any other form of van finance, there are some practical steps worth taking before you do.
Get your company registered and set up properly It sounds obvious but lenders will check Companies House as part of their assessment. Make sure your registered address is correct, your directors are listed accurately, and any required filings are up to date. A company that looks well administered from the outside makes a better first impression than one with missing or inconsistent information on its public record.
Check your personal credit files before you apply As a director of a new limited company, your personal credit history is likely to be the primary thing a lender looks at. Check your files with Experian, Equifax, and TransUnion before you apply and address any errors or inaccuracies you find. If there are genuine issues on your file, be prepared to explain them honestly rather than hoping the lender won’t notice.
Have a deposit ready As discussed, a deposit strengthens your application considerably when your company has no trading history behind it. If you’re in a position to offer a meaningful deposit, make that clear from the outset rather than waiting to be asked.
Don’t apply to multiple lenders at once Every full credit application leaves a search on your file, and a cluster of searches in a short period raises a red flag. Work with a broker who can identify the right lender for your specific situation before anything is submitted. That way your application goes to the most suitable place first time, without leaving a trail of declined searches on your personal or company credit file.
Talk to your accountant first This is particularly important if you’re genuinely considering a finance lease rather than hire purchase. The tax treatment of the two products is different, and the right choice depends on your specific circumstances, your VAT registration status, and how your accountant wants to handle the asset on your books. Getting that advice before you apply means you’re choosing the right product for the right reasons rather than defaulting to whichever one the lender offers first.
Be ready to provide supporting information New companies can’t rely on years of accounts to make their case, so anything else that supports the application helps. Signed contracts, confirmed orders, evidence of relevant experience in the industry, or a clear business plan all add credibility to an application that would otherwise rest entirely on the directors’ personal backgrounds.
Ready to explore your options?
Whether you’re looking for a straightforward contract hire arrangement, a finance lease recommended by your accountant, or hire purchase because you want to own the van at the end, the starting point is the same. A conversation about what your business actually needs and what’s available to you as a new limited company.
New company applications are more involved than straightforward ones, but they’re far from impossible. The key is approaching the right lenders with a well prepared application rather than going directly to whoever comes up first and hoping for the best.
We’ve been arranging commercial vehicle finance for UK businesses since 1994 and we have access to over 100 UK lenders, including those who specifically consider new limited companies. We’ll look at your full situation, advise you honestly on which product is likely to suit you best, and make sure your application goes to the right place first time.
There’s no obligation and an initial conversation won’t affect your credit score.
