Many business owners and aspiring entrepreneurs starting up a business enterprise often times encounter a lack of enough resources. Many might have the capital to purchase machinery and hire labour but stay undecided on whether to buy or lease a business vehicle. Although buying a business vehicle guarantees you full ownership, leasing has many benefits according to research done by professionals.
Vehicle leasing is becoming more and more popular, particularly with new businesses or those that have only been in operation for a few years. Whilst some organizations may be able to invest their money in an outright purchase of vehicles, for many leasing is a more attractive option.
Based on this, we wanted to showcase some of the key benefits that vehicle leasing can bring to new businesses.
Low Monthly Payments
We all agree that leasing a car instead of buying one for the business cuts down the capital required running the business. This is very beneficial to business owners who are new to entrepreneurship since the only objective every business wants is to minimize costs and maximize profits. The lease amount payable every month is between 30%-60% of the value of the car which is way cheaper than acquiring a new vehicle. This allows the business to utilize the savings made on other assets required by the business.
In most parts of the US when you lease a vehicle, you don’t pay sales tax on the whole value of a leased vehicle but, instead, you are only taxed on the portion of the value you use during the leasing period. It should actually be noted that when a business buys a vehicle, the business pays sales tax on the whole value of the vehicle which is very expensive for a business that is trying to grow. Lastly, when you lease a vehicle, the tax payable is spread all along the leasing period and is paid together with monthly instalments.
Greater control over cash flow
One of the largest benefits to new businesses is that they are able to maintain greater control over their cash flow, particularly in the first few years of operation.
Vehicle leasing allows business owners to budget for the monthly payment, adjust their spending accordingly and ensure that they have the correct finances available each month.
Lower initial investment
For new businesses, purchasing a vehicle or a fleet of vehicles is a large investment, but with new business vehicle leasing, that doesn’t have to be the case.
Leasing a company vehicle means that business owners are able to reinvest the initial funds into their business, easing any cash flow worries and keeping the business moving forward.
A wider selection of vehicles
If a new business has rapidly expanded, vehicle leasing gives a greater choice of vehicles, which is ideal if a business owner has clients and employees in different locations.
For example, businesses that are operating in larger cities may be able to take advantage of plug-in hybrid or fully electric vehicles, which provide drivers with greater fuel economy and the opportunity to reduce their impact on the environment.
In contrast, if a business operates on a national level, the owner may be able to lease vehicles that offer greater safety on longer journeys.
No Maintenance Fees
As a business owner, you should be clever enough to lease a vehicle at a time that coincides with the warranty period covered by the car’s manufacturer. This means that in case something goes wrong with the car, the manufacturer is responsible and caters for all repair costs. At the same time, many leasing companies offer free maintenance schedules during the lease period. On the other hand, many companies also offer a fully maintained operating lease meaning anything that goes wrong with the vehicle remains the responsibility of the company which saves you on business costs.
Full maintenance and servicing
When it comes to new business vehicle leasing, another benefit is that business owners can keep track of their fleets’ maintenance and servicing schedule, which in most cases, is included as part of their contract.
This means that they are able to both reinvest these savings back into the expansion of their business, whilst ensuring that their Duty of Care obligations are met, by providing vehicles that are safe, secure and at a minimized risk of breakdowns.
As vehicle technology develops at such a fast pace, it’s all too common to see maintenance costs for electronic systems increase, but since these costs are covered in the contract, it’s not something business owners need to think about.
Many car leasing companies have automatic free ‘gap’ protection which covers for a stolen vehicle or whenever the vehicle is involved in an accident. This pays off the vehicle in a situation where an insurance company doesn’t cover all the loss incurred. It is actually good to note that no loans come with automatic gap protection.
In conclusion, leasing business vehicle isthe best thing that a business should venture into instead of buying. It actually cuts down the costs that the business incurs and by doing so, the profit margins at the end of the month are higher. Therefore we would highly recommend small businesses to start off by leasing instead of buying vehicles for the business. Ready to learn more about how vehicle leasing could benefit your new business? Talk to us now!
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