Whether you’re starting your first fleet or assessing the current situation at your business, there are several questions to ask. One of these is sure to focus on the differences and relative benefits of buying and leasing your vehicles.
While buying offers advantages for some business owners, the benefits of leasing can be experienced in a range of ways, from cash management to corporate image. Here, we explore the ways in which leasing a fleet van will prove valuable.
One of the most significant advantages to leasing is the flexibility when it comes to cash flow. When you purchase a vehicle, some of your capital or a loan is required to pay for it. This, inevitably affects the company balance sheet.
Commercial leasing often gives you the option of making a smaller down payment on the vehicle, which is followed by monthly operating payment. By choosing to lease, you can reinvest the money that you would have spent on a purchase in your business instead. This is particularly useful for small and medium sized enterprises without the capital to cover large upfront costs.
The fact that van fleet leasing comes with two options makes it more versatile for businesses than purchase.
An open-end lease provides the most flexibility, lasting for a minimum of one year and offering a number of choices thereafter. When the term is up, you have the option to purchase or sell the vehicle, or continue to lease it on a rolling monthly basis. Choosing an open-end lease means you can avoid long contracts and upgrade your vehicle as often as your budget permits, but there is an element of financial risk involved.
The Terminal Rental Adjustment Clause (TRAC) sets a pre-established value for vehicle upon sale at the end of the lease. If the van sells for more than this value, you as the lessee are credited with the difference. If, however, the van sells for less you must make up the difference.
The other choice is a close-end lease. The monthly payments for these are more expensive and they run for a longer term – usually around three years – but there is no financial risk when the contract expires. The provider bears the responsibility for the vehicle once the lease term is up, and provided there is deemed to be no unreasonable wear and tear, and mileage restrictions are adhered to, you can walk away at the end of the term without paying further fees.
Many dealers offering van fleet leasing can offer both options and tailor the solution to meet your business needs.
Believe it or not, leasing your fleet vans can help with managing your resources. Buying a vehicle means that administrative tasks such as handling taxes and license renewals falls to the fleet manager. If you lease, however, these and other admin tasks such as record keeping are handled by the provider. This enables your employees to focus on other aspects of the business.
In addition, many lease providers offer maintenance and roadside assistance services that can be included in the monthly rental cost, helping you to manage the budget for your vehicles better.
The management tools available when you lease a van are also a worthwhile benefit. An established provider can often offer access to fleet management tools that can improve your office workflows, improving productivity by reducing time spent on day to day tasks.
Being able to manage aspects of your fleet such as mileage, location history and terms for each vehicle online can save time and effort on the part of employees. It also means that expenses can be monitored accurately, helping to identify where efficiencies can be made. Programmes are available to record and control fuel expenses too.
It may not be something that you immediately associate with corporate image, but the appearance of your fleet vans can say a lot about your business. Using more up to date models that are kept clean and presentable can encourage a positive perception of your business. Leasing enables you to upgrade at least every few years, keeping your company’s image fresh when drivers are out and about.
Opting to purchase a new van for your business means you get to pick exactly what you want down to colour and trim level. It is, however, a significant expense. For those who want to lease a used vehicle, however, the choice can be limited in your local area.
By choosing to lease your van, you open up access to the particular model you want. Thanks to their connections, leasing providers can get hold of vehicles from all over the country, meaning your needs can be met whether you want a short wheelbase panel van or a low mileage pick up truck.
We’ve already talked about the financial benefits of leasing in terms of monthly outgoings and reduced upfront costs. But there is a positive impact on your bottom line too. Leased vehicles are not normally reported as assets or debts on a company balance sheet; rather, they are treated as expenses so the business can enjoy a tax benefit as a result.
Vanwise Group has a range of commercial vehicles available for Business Contract Hire. Not only do we have a variety of used vans available, we can also tailor your leasing agreement to suit the requirements of your company. Choose the length of your term and benefit from a vehicle management package, which is included in your monthly costs.