Buying v Leasing: Deciding What's Right For Your Business

Shutterstock: Car Dealer Inventory

Shutterstock: Car Dealer Inventory

There’s a growing trend for leasing vehicles when one has just set up a business, for a number of reasons. Yes, there will be times when you want the security of your own transport, but there are other times when buying and selling a van or company car is just too much hassle. Let’s look at the pros and cons of leasing, and what decisions you might take for your business:

You need a new car but don’t have a huge amount of funds

There’s a strong chance that an SME will need new vehicles at some point in its early journey; for practical reasons, or branding reasons, or even simply because you want a more professional image. You might want the latest technology and a model to impress, but actually don’t have the immediate funds to buy it now or lay down a massive deposit – leasing will allow you to take the steps to get that car.

You always want to be driving a new car

At the end of your lease term you can either buy the lease car, or renew the lease with a new one, therefore starting again with a brand new vehicle. Got bored of a three-year-old Renault, Ford, VW or Citroen? Fine, lease a new one – for a similar fee if you like, or perhaps a slightly higher price for an even better car. Of course, this also means that you don’t have to worry about selling the car at the end of the spell. 

Maintenance included

For a minimal additional fee, maintenance might be included in the monthly rental. If you’ve been driving an older, less efficient vehicle that is showing signs of wear and tear, this monthly fee might pay for itself quickly and alleviate some of the stress.

Against

You’re unsure about mileage penalties

Leasing usually confers an annual mileage allowance of say, 8,000 miles a year. Should the driver go over that allowance, a penalty will be levied. Those who have long commutes to work, or those who have jobs where mileage is unpredictable or could rise during the lease term, may wish to avoid leasing. A good analysis of the pitfalls can be found at Auto Credit Express.

You want to use second-hand vehicles

Lease vehicles are generally new; the costs of leasing are based on the value of the vehicle at new and its depreciation during the length of the lease term. There would be little point in leasing companies offering vehicles that are second hand, since the depreciation would be so slow that it would hardly be worth their while. 

You want to own your car

Leasing does not mean ownership. A hire purchase contract will allow you to buy the vehicle at the end of the term, but until you have paid off the full value you are still only borrowing it. Only at the end of the two-to-four-year term will you be allowed to pay off the remaining value of the vehicle, and call it your own.

You don’t have time to keep the car in pristine fashion

Lease cars must be returned to the lease company at the end of the stint, so that they might be sold on. Therefore, the vehicle must be returned in a good condition. The BVRLA (British Vehicle Rental and Leasing Association) states that the vehicle should be returned in a ‘safe and roadworthy condition, with all the appropriate documentation, spare keys and equipment; should be serviced according to the manufacturers service schedule; and  should be in a clean condition to allow a thorough inspection of the car.’

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