SHOULD YOU LEASE A CAR FOR YOUR BUSINESS?
Leasing a car for your business has become more common in recent years, however, prior to purchasing a business vehicle, it’s well worth weighing up your options. There are a number of considerations that you need to make, which might make financing a business vehicle more appealing. Here are some of the pros and cons when looking at a car lease for an SME.
Upgrade your vehicle
One of the best parts of leasing a vehicle is that you can continue to upgrade your vehicle when the lease expires. Business leases for vehicles are normally between 2–4 years which means that you can keep the vehicle updated when the time comes to renew the lease. That also means you will potentially be able to keep the car under the manufacturer’s warranty. Some leases might even include repair and maintenance costs.
When you lease a car, you are normally just agreeing to a fixed payment each month for the duration of the lease. That means you won’t be required to come up with a large upfront payment, which you would typically have to if you purchased a car normally. This can mean additional capital you can spend on other areas of your business. The added advantage of this is you won’t have your money tied up in a depreciating asset.
Because lease providers operate large fleets of vehicles, there is the possibility to get discounts on vehicles and improved prices. This might mean a better deal on a superior model of car for your business.
A lease might be great for managing cash flow and reducing initial costs, however, you may find that you end up paying more than the value of the car over the life of the lease. It’s important that you assess the total cost of all lease payments, including indirect costs, and compare that to what you would have to pay to finance a vehicle. If you’re taking out a secured car loan, it might be possible to purchase the car without any money down. This is also worth comparing directly to the cost of leasing a car.
You Don’t Own the Car
If you’re running a business, there might be benefits to owning a car even if it is depreciating in value, when you take into account tax considerations. If you don’t own the car, you might not be able to make any alterations to the vehicle which could be required for your business.
If you sign a lease and for some reason, you don’t need to use the car anymore, you might be locked into the repayments for the life of the lease. It’s important to have a clear understanding of what you’ll need the vehicle for and how that fits into your business plan.