Is business car or van leasing right for my business?

Business car or van leasing is a way for employers to create a fleet or provide company cars as an employee benefit, without facing the upfront cost of buying the vehicles outright.

If your business is growing and your employees need to travel regularly for sales meetings and other offsite visits, consider providing them with their own transport.

Equally, if you need to move tools, goods or other materials, a fleet of leased vans is a great way to put some confidence into your logistics, compared with relying on third-party couriers.

But how can you decide if business car or van leasing is right for you? Let’s look at some benefits of business vehicle leasing, which might help you make a case for investment.

Advantages Of Business Vehicle Leasing

First, let’s run through some of the main advantages of leased business vehicles, including financial incentives, and implications for your talent pool and public perception of your brand.

Managing Fleet Expenses

Leasing is naturally more consistent in terms of expenditure. Instead of an upfront purchase price, you pay a fixed monthly rental, so you always know how much you need to cover your fleet leasing costs for the upcoming month.

Using Capital Elsewhere

Spending upfront on fleet vehicles means you can’t invest that capital in other business areas. Leasing spreads the cost out for set monthly rentals for the term of the lease, allowing you to spend sooner on other priorities.

Lack Of Capital

A new and fast-growing business might not have funds available to buy a fleet of vehicles outright. Leasing reduces the amount of capital required upfront, so you can still provide the most appropriate company cars, without needing that initial budget. It’s also worth noting however, that in most, but not all, cases, a business should be established for two years or more before finance providers will consider the business for leasing agreements. If your business does not yet qualify for obtaining leasing agreements, there may be other solutions such as staff taking out a personal leases in their own name and obtaining a car allowance to cover the costs.

Avoid Depreciation

If you own fleet vehicles outright, you must record them as depreciating assets in your company accounts. Because you don’t own leased vehicles, any fall in value over the course of your lease does not affect the apparent financial position of your business.

Attracting Talent

A comfortable, modern company car is a great way to attract talented candidates when advertising job vacancies, especially if they are electric vehicles with low benefit-in-kind tax for company car drivers. Business car leasing means you can ensure you’re offering the latest models on the market.

Updating Your Fleet

A typical business vehicle lease lasts for 2-3 years, and you can return the car or van at the end of that time. Take out a new lease on a newer model, and you’ll always have the newest, most comfortable and most efficient vehicles in your fleet.

Brand Perception

Ensure your staff arrives in style for meetings with customers, investors, and stakeholders. A new-model company car puts across the right corporate image and avoids any worries arising from employees using their personal cars for professional purposes, for which they may not be covered on their motor insurance. .

High Mileage

Business leases anticipate high usage levels, so your permitted mileage should be enough to cover daily commutes and business use of the car or van throughout the day. If employees are also using the vehicle for personal use, even if they are paying for petrol for those personal miles, the total mileage driven by the individual should be taken into account. Alternatively, if there is a significant fleet of vehicles, there may be an opportunity to run the fleet on “pool mileage”. Broadly speaking, this means that higher mileage vehicles are off-set by lower mileage vehicles.

Maintaining Your Fleet

Opting for a service and maintenance plan for fleet means that routine servicing is covered in your monthly costs, with no unexpected charges. It also means it’s easy for your fleet drivers to book in their vehicle at a time to suit them to ensure the vehicles are serviced and maintained to the manufacturer’s guidelines, without them having to pay up front and claim any costs back.

Vehicle Safety

Leased vehicles are typically new, which means they have some of the most cutting-edge safety features on the market. Those safety technologies should also be in good working order. This is great news for employers who want peace of mind regarding their employees’ health and safety on public roads.

Claiming VAT Back

Last but not least, it may be possible to claim back 50% of the VAT on a lease car. The 50% block is to cover the private use of the car.This is a complex area, so speak to your business accountant and make sure you structure your company car scheme to allow you to claim the maximum permitted amounts.

Why Might Business Car Or Van Leasing Not Suit My Business?

There are a few examples of when business vehicle leasing might not be a good fit for your needs, for example:

• If the lease terms are based on high mileage, and you don’t plan to use the vehicle much (although this may be negotiable).
• If your required mileage and capacity are very unpredictable or vary a lot (options like pooled mileage may help).
• If your business is structured in a way that does not qualify for business leasing (e.g. for businesses under 2 years old) .
• If you want to return the vehicle early, before the end of the leasing contract (this may still be economical, even if you have to pay an early termination fee).
• If you don’t trust your drivers to look after the vehicle (repairs due to driver negligence are likely to be your responsibility, although some business insurance policies may be able to help with this).

Ultimately, there will always be arguments for and against leasing vehicles for a business fleet — any major business decision should be based on an objective cost-benefit analysis.

Making The Final Decision

Are you keen to proceed with leasing business vehicles such as vans, pick-ups or or company cars? First, it’s worth discovering what business leasing terms are available to you and which cars or vans make or models are on the market.

Only by finding this out can you make a fully informed decision, with confidence in your cost-benefit analysis, so speak to a business vehicle leasing provider to ensure you’re making the best choice for your company.

While the terms and conditions of leasing arrangements may not be up for negotiation, variables like mileage and the inclusion of a maintenance plan can be adjusted.

This gives you the ability to nudge the cost-benefit ratio in your favour, and can make business car or van leasing a no-brainer for any growing business.