Running even a small fleet of company vehicles can be time-consuming. If you lease your company vehicles, though, you can afford to maintain a fleet of newer cars and trucks. This means less maintenance is required, and cars are rarely off the road. Here are ten more reasons why so many businesses lease vehicles rather than buy them.

1. Fast Approval

It is usually much easier to get approval for a leasing agreement than for a loan because the leasing company has the vehicle as security. The lending requirements are less stringent than those for a bank loan. So, leasing is the fastest and easiest way to finance company vehicles for many businesses.

2. Lower Upfront Costs

Leasing allows you to spread the cost of the vehicle across its useful life for your business. Any deposits required to lease a company vehicle will usually be much less than the portion of the cost you would need to raise to buy the car with a bank loan, and, of course, significantly less than if you were to purchase a vehicle outright for cash.

3. Leaves Your Working Capital Intact

Not having significant upfront costs means that more of your working capital remains in the business. The upfront cash you save by leasing vehicles can be used instead in profit-generating projects, like product development or marketing campaigns.  These working capital benefits can be especially beneficial for small businesses with limited funds.

4. Repayments Usually Lower than a Loan

The monthly payments on a lease will often be lower than monthly car loan repayments. The lower outgoings are partly due to the vehicle’s residual value being accounted for in the lease payments. The amount you pay will depend on the type of vehicle and the length of the lease. Even so, in most cases leasing will generally provide you with lower monthly payments.

5. More Manageable Cash Flow

Leasing makes the cash flow management implications of running a fleet of vehicles much less challenging. Instead of having large surges of cash outflows when new vehicles are purchased, you will have regular, predictable monthly cash payments. Even if a car or truck does need to be acquired unexpectedly, the impact on cash flow is only the addition of the extra monthly lease payment.

6. Easier to Maintain a Fleet of New Vehicles

When you lease your company vehicles, the average age of your fleet will be lower. So, most of your cars and trucks will require minimal maintenance and still be under warranty. The young age of the fleet will mean lower maintenance costs and fewer vehicles off the road at any time. It will also reduce the downtime of employees caused when motor vehicles are in for repair.

7. Reduces Risk

When you lease a vehicle, the leasing company bears the risk of the vehicle’s residual value being lower than anticipated. So, you will never find yourself owning a car that is worth less than the outstanding loan you took out to buy it. The reduced risk becomes even more beneficial if the vehicle is involved in an accident and needs to be written off.

8. Greater Flexibility

You can negotiate flexible terms with a leasing company. If you need a vehicle for only one year, for example, you can take out a one-year lease. If you have a flexible lease, you can return a vehicle part way through the lease, should it no longer be required. When you own your vehicles and circumstances change, you will be left with the headache of disposing of an unwanted vehicle.

9. Good for Company Image

A fleet of new vehicles is good for employee morale and good for the company image. A fleet of aging, run-down cars, sends out all the wrong messages. New vehicles still under warranty are also unlikely to break down, so there will be far fewer missed appointments or late deliveries.

10. No Hassles Selling Vehicles

When the lease period ends, you return your vehicle to the leasing company and exchange the old car for a brand-new one under a new lease agreement. You avoid all the hassle of trying to get the best price you can on older vehicles and shopping around for new ones.

Conclusion

In summary, leasing is a cost-effective and convenient way to finance company vehicles. It can free up working capital that would be better used for profit-generating projects. If you are unsure if vehicle leasing is right for you, it would be advisable to ask your Padgett accountant about the benefits of leasing.