How does leasing an electric company car work?
Electric commercial vehicles are becoming increasingly popular amongst business owners, self-employed people and fleet managers. The combination of lower energy costs, favourable tax schemes and a growing range of vehicles makes electric driving more attractive than ever for business purposes. But how exactly does leasing an electric company car work, and what should you look out for before signing a contract?
In this article, we answer the most frequently asked questions about leasing an electric commercial vehicle. From the basics to the tax details: by the end of this article, you’ll know exactly what to expect and how to make the best choice for your business.
What does leasing an electric company car involve?
Leasing an electric commercial vehicle means you use the vehicle for a fixed monthly fee, without having to buy it yourself. You drive an electric van or minibus of your choice, whilst the leasing company remains the owner of the vehicle. The lease term, mileage allowance and included services are set out in advance in a lease contract.
Leasing is a popular alternative to buying a commercial vehicle outright, as you do not have to pay a large sum up front. Instead, you pay a fixed monthly instalment that you can easily factor into your business budget. This makes leasing an attractive option for both small business owners who buy a small van consider this for larger companies with a whole fleet of vehicles.
What does a lease agreement typically cover?
The terms of a lease agreement vary depending on the provider and the type of lease, but in many cases they include the following elements:
- Use of the vehicle for an agreed period (often 36 to 60 months)
- A maximum annual mileage
- Maintenance and repairs (for full operational leases)
- Insurance and road tax (depending on the package)
- Replacement transport in the event of a breakdown or servicing
In the case of electric company cars, the contract may also include provisions regarding charging cards or a home charging point – something that is, of course, not an issue with traditional fuel-powered vehicles.
What are the benefits of leasing an electric company car?
Leasing an electric commercial vehicle offers several advantages over buying or leasing a petrol or diesel vehicle. The combination of lower running costs, favourable tax rules and a fixed monthly payment makes it an attractive option for many business owners, particularly at a time when sustainability is becoming an increasingly important consideration.
The main benefits at a glance:
- Lower energy costs: Driving an electric car works out cheaper per kilometre than driving a petrol or diesel car, especially if you charge it at a business rate or at home.
- Favourable additional tax liability: Electric lease cars are subject to a lower additional tax rate than petrol or diesel cars, which results in a tax benefit.
- No major upfront investment: You retain your working capital and spread the costs over the term of the contract.
- Always drive a modern vehicle: Once the contract has ended, you can easily switch to a newer model.
- Environmentally friendly image: Driving an electric vehicle reinforces your image as a sustainable business in the eyes of customers and clients.
- Access to environmental zones: More and more cities are imposing environmental restrictions; with an electric company car, you can drive anywhere without restriction.
What’s more, you’ll save on maintenance, as electric motors have fewer parts subject to wear and tear than internal combustion engines. No oil changes, less brake wear thanks to regenerative braking, and fewer breakdowns in general. In the long term, this translates into lower total cost of ownership.
What is the difference between an operational lease and a finance lease?
The difference between an operational lease and a financial lease lies in the ownership of the vehicle and the allocation of risks. With an operational lease, the leasing company remains the owner of the car and bears the residual value risk. With a financial lease, you effectively buy the vehicle on hire purchase and become the owner at the end of the term.
Operating leases explained
An operational lease is the most common type of lease for company cars. You pay a fixed monthly fee for the use of the vehicle, which includes services such as maintenance, insurance and road tax. At the end of the contract, you return the car. You bear no risk regarding the residual value of the vehicle.
This is what makes an operational lease so straightforward: you know exactly what your monthly costs are and don’t have to worry about the resale value or depreciation of the vehicle. It’s ideal if you always want to drive the latest model and want to minimise administrative burdens.
Financial leasing explained
With a finance lease, you finance the purchase of the vehicle through a leasing company. You pay a monthly amount, but the vehicle is recorded on your balance sheet as a business asset. At the end of the lease term, you pay a final instalment and become the owner of the car.
A finance lease is a good option if you ultimately want to become the owner of the vehicle, or if you want to capitalise it on the balance sheet. The downside is that you bear the residual value risk yourself and are responsible for maintenance and insurance, unless you arrange these separately. For a double-cab van If you use it intensively, this can sometimes work out more cost-effectively in the long run.
How is the additional tax liability calculated for an electric company lease car?
The additional tax liability for an electric company lease car is calculated as a percentage of the vehicle’s list price. You must add this amount to your taxable income. For fully electric company cars, a lower additional tax liability percentage applies than for vehicles with a combustion engine, resulting in a lower tax bill.
The standard additional tax rate for non-electric cars is 22% of the list price. A reduced rate applies to electric vehicles. The government has gradually increased this rate in recent years, but electric vehicles remain more tax-efficient for the time being. Always check the current rates with the Tax and Customs Administration, as these may change annually.
How does the additional tax liability work in practice?
Suppose you lease an electric company car with a list price of 40,000 euros. With a tax addition percentage of 16%, the tax addition amounts to 6,400 euros per year, or just over 533 euros per month. You add this amount to your taxable income. Depending on your tax bracket, you’ll pay either income tax or corporation tax on this amount.
Do you also use your company car for private purposes? If so, the additional tax liability applies. If you can demonstrate, by means of a comprehensive logbook, that you drive the car for private purposes for less than 500 kilometres a year, you will not have to pay the additional tax liability. For purely business use, it is therefore worth keeping accurate records.
What should you look out for in a company car lease agreement?
When taking out a lease agreement for a company car, there are a number of points you should check carefully before signing. The most important ones are: the included mileage, the term of the lease, the residual value, the penalty clauses, and exactly what is and isn’t covered by the maintenance package.
Take the time to go through every part of the contract. Lease contracts are legally binding and often run for several years. A minor oversight could lead to unexpected costs at the end of the term.
Mileage and additional kilometres
Every lease contract includes a maximum annual mileage limit. If you drive more than agreed, you’ll be charged a penalty for each extra kilometre. You should therefore estimate your expected annual mileage realistically – it’s better to err on the side of being slightly too high than too low. Extra kilometres work out more expensive in the long run than opting for a higher mileage package from the outset.
Maintenance and damage
Check which maintenance costs are included in the monthly fee. With a full operational lease, these are usually covered comprehensively, but under some contracts you’ll have to pay for tyres or certain repairs yourself. Also check the claims procedure: how are minor claims handled and what are the excesses?
Early termination
If you wish to terminate the contract early – for example, because your business is downsizing or you want to change vehicles – most leasing companies will charge a penalty. Ask in advance about the terms and conditions for early termination and whether any flexible options are available.
Charging infrastructure and electrical specifications
When leasing an electric company car, it’s a good idea to also enquire about charging arrangements. Is a charging card provided? Is a home charging point included or can one be arranged? What is the vehicle’s charging capacity, and does that suit your day-to-day use?
How do you go about leasing an electric company car?
When leasing an electric company car, you start by assessing your driving needs, choosing the right type of lease and requesting quotes from reliable providers. You then compare the terms and conditions, choose the vehicle that suits you and sign the contract. After that, the company car is ready for use.
A structured approach will help you make the right choice. Follow these steps:
- Decide on your usage: How many kilometres do you drive each year? What load capacity do you need? Do you drive in town, on the motorway or in the countryside?
- Select the type of vehicle: A small electric van, a larger flatbed lorry or a double-cab commercial van? Choose the one that best suits your day-to-day work.
- Choose the type of lease: Operating or finance lease? Find out which tax and financial arrangement best suits your business.
- Request several quotes: Don’t just compare the monthly price; also compare the services included, the mileage allowance and the terms of the contract.
- Check the contract: If in doubt, ask an adviser or accountant to look it over before you sign.
- Regulate the charging infrastructure: Please ensure that you can charge the vehicle at home or at your business premises before it is delivered.
You should also contact your accountant or tax adviser to work out the tax implications for your specific situation. This will help you avoid any surprises when you file your tax return.
How we help you lease an electric company car
At Van den Hurk Commercial Vehicles, we help you from start to finish in finding the right electric commercial vehicle on a lease. We understand that every business owner has different requirements when it comes to their vehicle, their budget and their usage. That’s why we offer personalised, tailored advice, so you don’t get lost in a maze of technical specifications and contract terms.
What we do for you:
- A personalised consultation to discuss your driving needs and the most suitable electric commercial vehicle
- A wide range of electric commercial vehicles, from compact vans to larger models
- Flexible leasing options, including both operational and finance leases, tailored to your situation
- Transparent prices with no hidden costs
- Support with delivery and practical matters such as charging infrastructure
- More than 60 years of experience in the Helmond and North Brabant region
Want to know which Leasing options for electric company cars Is this the right choice for your business? If so, please get in touch with us for a no-obligation chat. We’d be happy to help you find the right solution and ensure you hit the road in a vehicle that’s truly suited to your needs.
