Should I buy or lease a car for my business?
By LeaseCar , 29 May 2019
You’re about to invest in a new car for your business - but should you buy it or enter into a lease agreement instead? This isn’t a straightforward question to answer because what’s right for you will depend on your specific needs and circumstances. To help you make an informed decision, we explain what leasing is, the options available to you and how they compare to purchasing a vehicle outright.
What is business car leasing - and who is it for?
Put simply, business car leasing gives you access to the vehicle of your choice in return for regular monthly rentals, which you make to a finance company. There are leasing agreements available for single cars or whole fleets of vehicles.
The agreements can enable you to afford cars that would be too expensive to purchase, and they mean you can switch to new vehicles every two to four years, so you always have access to the latest technology.
Companies in all industries can make use of leasing agreements, from major nationals and multinationals to sole traders.
How does business leasing work?
In simple terms, business car leasing allows you to choose your preferred vehicle and then, in return for an initial rental and subsequent monthly rentals, you can drive and enjoy it until your agreement comes to an end and you return your car. However, there are variations between different lease agreements.
What is business contract hire?
Business contract hire agreements typically last for between 24 and 48 months. During the period of the contract, you make monthly rentals in return for use of the car, and once your agreement comes to an end, you simply return it to the finance company. You can choose a contract length and mileage allowance to suit your needs.
What are the main benefits of business car leasing?
There are many benefits associated with business car leasing. As mentioned previously, it can be an effective way to access the vehicles you want at an affordable price. Because of the importance of making the right impression on customers and clients, being able to get high quality new vehicles can be hugely important to companies.
Business contract hire agreements also help you to control your vehicle-related costs, particularly if you opt for packages that include maintenance and servicing.
In addition, you don’t have to worry about the value of your vehicle depreciating. At the end of the agreement, you can simply return your car to the finance company - you don’t have to think about selling it on.
How does buying compare?
Buying a car outright does have certain advantages. For example, you don’t have to stick to an agreed mileage. Also, once you’ve purchased a vehicle, you can decide to trade it in or sell it at any time, and it’s an asset that you can use to pay outstanding debts if necessary.
On the flipside, you do have depreciation to deal with. According to the AA, a new car will lose around 40 per cent of its value within a year of purchase. Then of course there’s the money you need to part with upfront. For many companies, the cost of new cars is simply too high, meaning they can’t afford to buy them in this way.
There is no right or wrong answer when it comes to whether you should lease or buy a vehicle for your business. You need to weigh up the pros and cons of each option, including what you can afford and what exactly it is that you want from your company cars. There’s no denying the popularity of business contract hire and business contract purchase agreements, but this doesn’t mean they are right for every company. The important thing is to do your research and make sure you’re in the know before you come to a decision.
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