This article is a collaboration between Coral at JVCA (that’s me, your friendly accountant) and Karen at Webcars, a car leasing broker. Between us, we’ve helped hundreds of business owners navigate the company car question. Here’s what we think you need to know.
If you’re a business owner considering a company electric car, you’ve probably already heard the headline: electric vehicles get the best tax treatment. And that’s true. But the next question, to lease or buy, is where it gets interesting.
When I ran the numbers for my own car nearly three years ago, purchasing came out ahead on tax. But if I were making that decision today? I’d probably lease. Here’s why the calculation isn’t as straightforward as it looks.
The tax position: buying looks good on paper
When you buy a company electric car outright, your company can claim 100% first-year capital allowances under the current super-deduction rules for zero-emission vehicles. That’s a chunky tax deduction in year one.
When you lease, the monthly payments are deductible as a business expense, but you don’t get that big upfront allowance.
My calculations suggest purchasing wins on tax by about £1,000 over four years, roughly £250 per year. On the numbers alone, buying looks like the right call.
So why would I advise most clients to lease?
Because the tax calculation isn’t the whole picture.
The hidden risks of buying
Here’s where it gets complicated, and where Karen’s expertise comes in.
Residual value risk
Electric car values are changing fast. Battery technology is improving; manufacturers are cutting prices, government policy keeps shifting, and all of this affects what your car will be worth when you come to sell it.
If your company owns the car, your company owns that risk.
As Karen puts it: “The used electric vehicle (EV) market has been unpredictable over the past couple of years. Some vehicles are seeing faster-than-expected depreciation because of battery improvements, new model launches, and steep price cuts on new cars. Government incentives have created demand spikes for certain models while leaving others struggling. For business owners, this means residual value risk is real, and it’s growing.”
That £1,000 tax advantage? It could easily be wiped out, and then some, if you take a hit on resale.
You’re locked in
Once your company owns the car, you can’t easily change it. You can’t downgrade without selling, and with EV technology moving as quickly as it is, that three-year-old car can start to feel outdated fast.
Karen’s take is: “Battery Electric Vehicles (BEVs) typically cost more than their Internal Combustion Engine (ICE) counterparts, so many lessees extend contracts to four years rather than the usual three to keep monthly payments manageable. We’re also seeing cautious customers re-lease used EVs. Some finance providers now offer select end-of-contract EVs on 12-month, fully maintained leases with low deposits, giving drivers a low-risk way to experience the technology.”
In other words, the leasing market has adapted to the uncertainty; the ownership market hasn’t.
Where leasing becomes attractive
Leasing shifts risk away from your business. And for most business owners, that’s worth more than a modest tax saving.
No resale risk
When the lease ends, you hand the car back. That’s it. There’s no wondering what it’s worth, no haggling with buyers, and no surprise depreciation hitting your balance sheet.
That alone removes the biggest uncertainty in company electric car ownership.
Predictable costs
Buying a car means budgeting for the unexpected: maintenance, repairs, tyres, breakdowns. Leasing – especially with a maintenance package – turns all of that into a fixed monthly cost.
“Leasing gives businesses predictable monthly costs,” Karen explains. “Optional maintenance packages include tyres, servicing, and breakdown cover. This means you can forecast expenses easily, free up capital, and focus on growing your business, without being tied to assets that could depreciate faster than anticipated.”
From an accountant’s perspective, predictability is valuable. It makes cashflow easier to manage and financial planning more accurate. And when you’re running a business, fewer surprises is usually a good thing.
Flexibility
Technology moves fast, policy changes, your circumstances change…this is inevitable. With a lease, you’re not committed for the long haul. When the contract ends, you can upgrade to the latest model, switch to something different, or walk away entirely.
That flexibility has real value, especially in a market that’s still evolving.
The benefit-in-kind advantage (this applies either way)
Whether you lease or buy, a company electric car comes with significant benefit-in-kind (BIK) advantages for the driver.
For the 2024/25 tax year, the BIK rate for fully electric vehicles is just 2%. Compare that to petrol or diesel cars, where rates can hit 37% depending on emissions.
For a higher-rate taxpayer driving a £50,000 electric car, that’s the difference between paying around £400 per year in BIK tax versus potentially £7,400 for a comparable petrol car. The savings are substantial, and they apply regardless of whether the company leases or purchases.
So which should you choose?
If you’re the kind of person who likes to own things outright, hates monthly payments, and is confident you can predict where EV values are heading, buying might work for you.
But for most business owners? Leasing makes more sense.
You give up a modest tax advantage in exchange for:
- No resale risk
- Predictable monthly costs
- Flexibility to change as technology improves
- Less capital tied up in a depreciating asset
And honestly? The peace of mind is worth something too.
When I bought my car nearly three years ago, it was the right decision for us at the time. But the market has changed, the technology has moved on, and the risks have shifted. If I were doing it again today, I’d lease.
Takeaways
Getting a company electric car is almost always a smart move from a tax perspective. The BIK rates are unbeatable, and the running costs are lower than petrol or diesel.
The lease vs buy question, however, is more nuanced. The tax numbers might favour buying, but the real-world risks often favour leasing.
Our advice? Talk to your accountant, talk to a leasing broker, and make sure you’re looking at the whole picture, not just a few numbers that you like.
About the authors
This article was written by Coral at JVCA – the friendly accountants – and Karen at Webcars, specialists in vehicle leasing for businesses. If you’re thinking about a company car, we’d both be happy to help.
For tax and structuring advice: contact Coral at JVCA
For leasing options and quotes: contact Karen at Webcars
