Are you a self-employed person and want to drive without worries? With operational lease, you pay a fixed amount per month and drive a decent car without being the owner. In this article, we will tell you exactly what it is, how it works, the VAT rules and when it is a smart option for you as an entrepreneur.
What is operational leasing?
As an entrepreneur, with operational leasing you rent a car from a leasing company. You pay a fixed amount each month to use the car. But in this case, the leasing company remains the official owner. At the end of the lease contract, you return the car. So it is similar to renting, but it usually includes extra services.
How does operational leasing work?
You sign a lease contract for usually 2 to 5 years. The monthly amount includes maintenance. But also insurance, road tax and often breakdown assistance. You only have to fill up with petrol or recharge the car yourself. You agree in advance how many kilometres you can drive per year. And do you drive more? Then you pay extra per kilometre. Do you drive less? Then you sometimes get a refund. So you always know exactly what your car expenses are.
Who is it interesting for?
Operational leasing is perfect for the self-employed person who:
- prefer not to spend a lot of money at once
- want everything organised down to the last detail
- likes fixed and predictable costs
- do not want any hassle with maintenance or loss of value
- likes to drive a new car every few years
With operational leasing, you hand over the car management. This saves you time and paperwork.
Overview of advantages and disadvantages
| Advantages | Cons |
| No upfront investment | The car is not yours |
| Fixed monthly costs | Additional taxable benefit for private use |
| Maintenance and insurance included | Mileage limit per year |
| No worries about depreciation | No tax depreciation or KIA |
| Representative car without the hassle | Contract difficult to terminate mid-term |
VAT and operating lease
A big advantage of operational leasing is that you often get a full refund of VAT on the monthly lease amount. This applies if you use the car for VAT-taxed activities. You can then put this VAT as input tax in your tax return.
Do you also use the car privately? Then you have to make a correction for private use at the end of the year. For private use of business items, such as cars, you cannot deduct VAT.
Just make sure the lease invoices are in your company's name. You can also often reclaim fuel and maintenance costs not included in the lease contract. This is only possible if you use them for business purposes and keep good records.
Difference with financial lease
With financial leasing, you yourself are the economic owner of the car. The car then appears on your balance sheet. You arrange insurance, maintenance and road tax yourself. So you build up ownership, but you also have more work to do with it. Operational lease is mainly meant to unburden you. Financial lease is useful if you want ownership.
Want to know more? Then also read our article on financial lease for sole traders.
Conclusion
Operational lease gives you convenience, security and overview as a self-employed person. It allows you to drive without worries. You drive a new car without spending a lot of money first, with fixed monthly costs and little hassle. Just be aware that there are conditions attached. Think about additional taxes and mileage limits. Would you rather take ownership and benefit from investment deductions or depreciation? Then financial lease might suit you better. Above all, talk to your accountant about what is fiscally smartest for your situation.
