Business car finance
Compare Business
Car Finance
What we do
Compare Advantage is a free comparison service. Tell us which car, or cars, the business needs, and our partner, FCA-authorised broker Halo Corporate Finance, checks your enquiry against the 130+ lenders on its panel. Compare hire purchase, leasing and contract hire before you sign the dealer’s paperwork.
- Company cars for directors and staff
- Hire purchase, finance lease or contract hire
- Electric, hybrid, petrol and diesel, new or used
Prefer to talk? Call 0330 057 7175
- 130+ lendersOn our partner’s panel
- £5k to £1mLoans and asset finance
- One enquiryInstead of one per lender
- FCA-authorised partnerHalo Corporate Finance
- Free to enquireNo obligation to apply
Compare before you apply
For a company car, tax decides more than the rate
Two cars at the same monthly payment can cost a business very different amounts once capital allowances, benefit-in-kind, the lease rental restriction and VAT are counted. Those rules turn on the car’s CO2 emissions and on the kind of agreement. Comparing lenders matters, but so does comparing structures: the cheapest monthly on paper is not always the cheapest car for the business.
- 1
Tell us once
Two minutes on the form: how much, what it is for and a few details about the business.
- 2
The panel is checked
Halo Corporate Finance matches your enquiry against the 130+ lenders on its panel.
- 3
You choose
Halo talks you through the options that fit. You decide whether to apply. There is no obligation.
What to compare
- The dealer’s finance against the panel, on the same car, deposit and term, so the difference is the lender alone.
- Owning against handing back. Hire purchase ends with the car yours. Contract hire ends with it returned, and the resale risk stays with the funder.
- Electric against petrol on cost after tax, not the list price. The allowances, the benefit-in-kind charge and the VAT rules all differ.
- Mileage and condition terms on contract hire. Excess mileage and damage charges can outweigh a lower rental.
- Balloon payments, which lower the monthly cost but leave a large sum at the end. Plan how you will pay it.
Your options
Hire purchase, finance lease or contract hire?
The three main ways a business funds a car, and how each is treated.
| Feature | Hire purchase | Finance lease | Contract hire |
|---|---|---|---|
| Who owns the car | You, after the final payment | The funder. You may sell it on its behalf at the end | The funder. You hand it back |
| Capital allowances | Your business claims them | Usually the funder | The funder |
| Lease rental restriction | Not applicable | 15% of rentals disallowed if CO2 is over 50g/km | 15% of rentals disallowed if CO2 is over 50g/km |
| VAT | Usually not reclaimable on the price, unless used only for business | Usually 50% of VAT on rentals reclaimable where there is private use | Usually 50% of VAT on rentals reclaimable; maintenance VAT often fully reclaimable |
| Usually suits | Cars you will keep for years | Businesses wanting to share in the resale value | Fixed costs and regular replacement |
A general guide to HMRC’s rules as of November 2026. Your accountant can confirm the treatment for your business.
Emissions
The two numbers that matter: 0 and 50
For tax, a company car falls into one of three groups by its official CO2 figure.
- Best treatment
0g/km: new electric
A 100% first-year allowance is available on new zero-emission cars until 31 March 2027 for companies and 5 April 2027 for income tax. The whole cost can be deducted in year one.
- Middle
1 to 50g/km
Main rate pool, written down at 14% a year from April 2026. Second-hand electric cars go here too. No lease rental restriction.
- Least generous
Over 50g/km
Special rate pool, written down at 6% a year. On a lease, 15% of the rentals cannot be deducted.
The October 2026 Budget proposed cutting the main writing-down rate to 12% from April 2027. It is not yet law.
For the driver
Benefit in kind on electric company cars
When a company car is available for private use, the driver pays income tax on a percentage of its list price, and the company pays Class 1A National Insurance on the same figure. For electric cars that percentage is low, and the government has set it for the next five years.
That certainty is useful when choosing a car on a three or four-year agreement: you can see what the driver will pay for the whole term before you sign.
Electric car benefit-in-kind rates
- 2026/27
- 4%
- 2027/28
- 5%
- 2028/29
- 7%
- 2029/30
- 9%
- 2030/31
- 10%
Source: HM Treasury, Budget 2026 rates and allowances.
VAT
Why cars and vans are different for VAT
A VAT-registered business can usually reclaim the VAT on a van. On a car, the rules are stricter, because most company cars are available for some private use.
Buying, or hire purchase
VAT on the price is usually blocked, unless the car is used only for business and is not available for private use, such as a pool car kept at the premises.
Leasing and contract hire
Where there is any private use, a business can usually reclaim half the VAT on the rentals. VAT on a separate maintenance charge is often fully reclaimable.
One car or a fleet
Several cars on one facility
Businesses with several cars often set up a facility they draw on as cars are added or replaced, rather than separate agreements for each. It can simplify admin and keep replacement on a regular cycle.
Electric
More electric cars on sale
Under the zero emission vehicle mandate, the 2026 target is for 33% of new cars sold by each manufacturer to be zero emission. The mandate is under review, so the targets may change.
Need vans as well as cars? Vans have different VAT and tax rules; see van, HGV and fleet finance.
What is business car finance?
Finance for cars used by a business, whether for directors, staff or pool use. The main options are hire purchase, a finance lease and contract hire. Vans and commercial vehicles have different tax rules and are covered on our vehicle finance page.
Should my business buy or lease a company car?
It depends on how long you keep cars, how they are used, and the tax position. Buying or hire purchase lets you claim capital allowances and keep the car. Contract hire gives fixed costs and passes the resale risk to the funder. Our hire purchase vs finance lease guide sets out the trade-offs.
Can I claim the VAT on a company car?
On the purchase price, usually not, unless the car is used only for business and is not available for private use. On lease rentals, a business can usually reclaim 50% of the VAT where there is private use, and VAT on a separate maintenance charge is often fully reclaimable.
Why are electric company cars so popular?
Mainly tax. A new zero-emission car can qualify for a 100% first-year allowance until March 2027, and the benefit-in-kind charge on electric cars is 4% in 2026/27, far lower than for most petrol and diesel cars.
What is benefit in kind on an electric company car?
It is a percentage of the car’s list price that is taxed as the driver’s income. For electric cars it is 4% in 2026/27, rising to 5% in 2027/28, 7% in 2028/29, 9% in 2029/30 and 10% in 2030/31.
What is the lease rental restriction?
If a leased car emits more than 50g/km of CO2, 15% of the lease rentals cannot be deducted for tax. Electric and low-emission cars under the threshold are not affected.
Can I finance a used car through the business?
Yes. Many lenders fund used cars. A second-hand electric car goes in the main capital allowance pool rather than getting the 100% first-year allowance, which is for new cars.
Can a sole trader get business car finance?
Yes. If you are a sole trader, or a partnership of two or three partners, an agreement of £25,000 or less is usually regulated by consumer credit law, which gives you extra protections.
Is a double cab pick-up a car or a van?
For capital allowances, most double cab pick-ups have been treated as cars since April 2025. See our vehicle finance page for the detail.
Can I finance a charger with the car?
Often, yes. Home or workplace chargers can sometimes go on the same agreement. See renewables finance for chargers with solar.
Sources
- GOV.UK: Capital allowances on business cars
- HMRC: Extension of first-year allowances for zero-emission cars and chargepoints
- HMRC Business Income Manual: lease rental restriction (BIM47714)
- HM Treasury: Budget 2026 rates and allowances (company car benefit percentages)
- HMRC VAT Notice 700/64: motoring expenses
- legislation.gov.uk: Regulated Activities Order, article 60C
- FCA register: Halo Corporate Finance Ltd (FRN 726655)
Written by the Compare Advantage team, Chorley. Facts checked against the sources above on 4 November 2026. This page is general information, not financial advice.
Compare Advantage Ltd (FRN 1028452, company no. 14289362) is an Introducer Appointed Representative of Halo Corporate Finance Ltd (FRN 726655). We introduce business finance enquiries to Halo. We are not a lender and do not give financial advice. If you take out finance, the lender may pay commission to Halo Corporate Finance, and Halo may pay us a fee for the introduction. Finance is subject to status and is available to UK businesses only.