How business contract hire on electric cars work?

How do electric cars and business contract hire deals work?

Understanding personal v business finance products for the world of motoring can sometimes be difficult. The difficulty for customers is that what they are offered will really depend on where they start shopping - at a franchised dealership, a used car garage or motor supermarket, an online finance company or a leasing broker.

Not every business will utilise the same products or they will prioritise certain options which best meets their skill sets and product. So while a business customer could walk into their local dealer and be offered a hire purchase option, they could be advised that contract hire and leasing is a better route if they start with a broker.

While every business is pushing for the best electric car lease deals, the amount you pay is only relevant if you are utilising a product which actually meets your needs and requirements. And for companies, this often means thinking about their fleet, understanding the tax position, chatting with their accountants and considering the long-term position of their vehicles. And that’s before suitability for the actual cars begins.

So how does electric car contract hire for a business work?

Often referred to as business leasing, this form of EV finance is what we would call a usership, or non-ownership, style arrangement. This is not suitable if you wish to purchase a new car; whether that be for tax reasons (explained in a later guide) or because you want to keep the vehicle for a long period of time.

In short, this does what it says on the tin - this is a contract to hire a ZEV for a set period of time. With contracts usually being based on either 2,3 or 4 years, this is not quite the same as flexi-lease or subscription offers, which became more popular since 2020.

Those type of options are generally for 3 - 12 month contracts and are often used if you have a new employee on a probationary period or where you simply want to try electric driving for an extended period before committing to a longer term. While subscription is generally much more expensive, it is more flexible. For our customers taking contract hire, they will arrange a contract based on personal preference; some customers like to change every 2 or 3 years (particularly to coincide with a warranty period) whereas others prefer the often cheaper 4 year term.

But to be clear this is a fixed contract with leasing, there is no ability to swap, change or upgrade while you are in it and you must enter a process known as “Early Termination” in order to end the contract. And this means paying an amount equivalent to half of the remaining rentals to return the EV.

But is the electric business lease contract bespoke to the company / driver?

Absolutely. The price you are paying per month is ultimately built around what you need / want. So a contract will not only be based on your term but it will also take into account your annual mileage (5,000 - 50,000 per annum), initial rental (the 1st month payment or deposit) and your maintenance requirements.

The mileage on a leasing contract is really important for an EV for two reasons - 1) the range (and charge speeds) will dictate whether or not the car is suitable for a company car driver; and 2) if your mileage isn’t set correctly you either go under mileage (and over-pay) or you go over mileage (and pay excess mileage bill).

Suitability of the range, and charging, can often be a notion of complication for some fleets and much of the data available for a car selection just isn’t accurate or particularly useful. To assist all of our e-car BCH customers we offer two free key pieces of information:

1. An EV Range Comparison Guide showing the best electric cars for businesses ; and

2. Every car and quotation will be accompanied with an EVC™ -  Electric Vehicle Certificate  - which tells the fleet manager and driver exactly HOW the car will perform (or not, as the case may be) 

Is the VW ID3 the best EV hatchback company car for business lease?

So you can quickly ascertain the car’s performance, we set this out in conjunction with our “living with your …” analysis for each and every EV. Because of the diversity in battery options and output, we appreciate that it is not always easy for a company to choose the best solution.

For example, if you are a high-mileage driver covering 20,000 mileage (or more), particularly on motorways, you need to ensure a car is selected which not only offers a robust full range BUT it also can charge quickly enough in the public domain. When you are reviewing our website, always use our real-world range analysis but with particular focus on how the BEV will operate in the conditions you drive most frequently i.e. smaller roads or motorways.

Also note the impact of weather and external temperature too! Within the EVC™ and the Battery & Plug Type both the AC and DC capabilities of the vehicle are set out. For rapid charging in the public domain, this is what you need to understand in connection with the charge point you are likely to use.

Use our Charge Times analysis to understand the actual time it takes but also use Zap Map  to help understand the infrastructure around you. And all e-car lease customers will receive a 1 year subscription to the Premium App - for complete support and updates, plus the payment service to avoid you having to download too many charge point apps.

Your initial rental, or deposit, is the amount you pay in month one. While many businesses are cash-flow centric and will utilise a no-initial rental, or 1 spread contract, we do get requests from companies for higher upfront payments. The quote calculator on the e-car website will set out your options, from 1/S - 12/S, with the actual amount set out below for you to review.

Because the initial rental is offset against your corporation tax, for profitable companies with potentially higher tax bills, this may be a way in which they mitigate that exposure. However, speak with our expert team to ascertain which solution is the right one.

And finally you do need to decide whether to proceed with either a driver or funder-maintained business lease. In the former, the cost of all servicing, tyres and breakdown (unless provided by the manufacturer) is undertaken by the company. The lease will therefore just cover the finance aspects of the EV.

And while the running costs are generally lower on an electric car, this doesn’t mean you don’t have to service or change tyres. With road risk and duty of care, directors and fleet managers have to carefully plan and organise their fleet policies. Not to mention if there is time and cost expended in fleet maintenance. With a funder-maintained arrangement, the cost of all servicing, tyres and breakdown is included for the duration.

Many finance companies (terms do vary) will ensure unlimited premium tyre replacements, mobile tyre fitting, MOT tests, mechanical and electrical repairs plus breakdown recovery for the term. This ensures a planned budgeting, one-call ease for drivers to organise their maintenance and the company enjoys 100% VAT recovery on the maintenance rentals. If you want to ensure a robust and less onerous fleet policy, then consider including the maintenance.

For any businesses looking for help and advice on their next electric car lease deal, just speak to the UK’s leading leasing broker.

In terms of the car shown, the Volkswagen ID.3 HATCHBACK 150kW Family Pro Performance 58kWh 5dr Auto (Pure Electric Vehicle), this is based on the following configuration:

•  Scale Silver Metallic Paint
•  Flow design/Art velour microfleece cloth - Dusty grey/soul black
•  18" Aero steel wheels

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