Funding your fleet cars
The first question our fleet experts will ask when designing your fleet is: "Purchase or lease?"
In our experience, business owners prefer the latter. A large amount of capital is required to purchase an entire fleet. Whereas leasing frees up money to be spent elsewhere.
Purchase or lease?
Here’s a helpful breakdown of the two types of funding options so you can make the right decision for your business:
- Purchase: the business buys each vehicle outright in one lump sum. The business then owns the car as a regular company asset and when sold the proceeds go back into the general funds. This involves having a large amount of capital up front.
- Lease: the business owns the vehicle but does not pay in full up front. Instead, a deposit is paid and regular fixed payments are arranged. When the final instalment is paid, the business takes full ownership of the vehicle and when sold, all proceeds will go back into the general funds. This does not involve having a large amount of capital up front as you are paying in smaller, more manageable instalments.
The benefits of leasing: Manageable payments
One of the main reasons fleet managers get excited by the prospect of leasing is that it leaves their cash free to buy other products and services. Why have money tied up in vehicles when it could be spent on marketing, machinery or to drive growth? Understandably, most business owners prefer the idea of small and manageable payments spread over a few years, rather than the expense of one large sum that could be spent elsewhere.
The benefits of leasing: Save on VAT
When purchasing a vehicle outright, not only is the upfront cost a lot to handle, but the 20% VAT on top is significant. Not to mention if you’re buying a fleet of vehicles. This is another reason business owners prefer to lease than purchase a company car as you only pay VAT on the rental amount, not the overall purchase price. Also, every one of the monthly instalments is expensable, so you can save money on your tax bill.
The benefits of leasing: Access to the latest technology
When purchasing a vehicle outright, it feels economical to keep it for as long as it’s still a functioning and practical car. However, this can lead to employees driving older cars with dated technology and safety features. In contrast, many leasing options include upgrades that allow you to jump up to the latest model for a fee. This way, your staff can always be driving around in the latest model, with the latest technology and the most advanced safety features.