Vehicle leasing can be an attractive option for businesses large and small. The latest statistics from the BVRLA show YoY growth, with nearly 300,000 cars and vans leased to UK companies at the end of 2017.
One of the main benefits of business leasing is flexible contracts, as well as tax incentives, making it a convenient and affordable option.
Here are the most important things to consider when deciding if vehicle leasing is the right option for your business.
Keeping in the black
If your business is just starting out or growing quickly, balancing the books will be one of your biggest priorities.
Buying your first company vehicle or adding to your fleet can be a huge upfront investment, so if you’re cash-poor or want to free up money to spend elsewhere in the business, vehicle leasing could be the right decision.
Unlike purchasing, leased cars or vans don’t count as a company asset, meaning you can claim your monthly lease payments as a business expense. If the vehicle is used entirely for business purposes you’ll also get back 100 percent of the VAT or 50 percent if you also need it for personal use.
If you’re leasing a new vehicle, the manufacturer warranty should cover the lease period, so you won’t have to pay out for any damage caused by a manufacturing defect.
Choosing the right contract type
Before jumping straight into an attractive leasing deal, businesses should be aware of the different types of contracts and the benefits of each.
The most common form of leasing is “Business Contract Hire” whereby a business leases a vehicle or fleet and simply pays off the depreciation value over the course of the contract.
Another popular form is a “Hire Purchase Contract” which gives you the option (or obligation depending on the contract) to own the vehicle at the end. This can be paid in a one-off ‘balloon’ payment or higher monthly sums.
“Hire Purchase” could also be a good option if you want to pay off the value of the vehicle in monthly instalments and avoid any additional charges for excess mileage or damage as the vehicle won’t be returned to the finance company.
Agreeing a leasing period
Leasing vehicles for your business gives you the flexibility to meet the changing needs of your company, your staff and your customers. Car leasing brokers try to accommodate this by offering different length contracts, usually starting at 24 months and going up to 60 months.
If keeping up your business’s public appearance is important, a shorter contract can give you the ability to switch to the latest model or upgrade features in line with your budget.
If you prefer the certainty of a longer lease, the smaller your initial deposit (if applicable) and monthly repayments will be.
If your business has less-than-perfect credit, don’t rule out vehicle leasing.
There are bad credit leasing contracts available to those with a wide range of credit and financial backgrounds, often running for 48-60 months which is slightly longer than most standard leases.
Overtime, a leasing contract could even help increase your business’s overall credit score and give stability in the age of your accounts.
By Tom Preston, Managing Director at Hippo Leasing