By RAM Tracking on 5 Jan 2023
If you’re running a fleet business, you have to oversee several things, from drivers and fuel management to safety and vehicle maintenance. And when we talk about vehicles, fleet managers must put a lot of thought into lease v buying car. This is a significant question, especially if you’re starting a business in the commercial vehicle landscape.
In reality, choosing between these two options takes a lot of work. Fleet owners have to consider many factors like budget, fleet size, company goals, delivery standards, etc. But even after going through these factors, if your thoughts about leasing v owning a car are overcrowded, this guide can help you make a decision.
When it comes to business vehicle leasing, you use a vehicle on rent, usually for a year or more. Basically, you’re paying to use the vehicle rather than paying for the vehicle. There are two types of car leasing options;
- Open-end Leases: You can use the vehicle on a minimum lease agreement. The minimum term is one year, and later you can increase the lease period month-to-month as per your preference.
- Closed-end Leases: The lease agreement is for a fixed time, and you pay the lease amount monthly. In this type of lease, you cannot go beyond a particular mileage and avoid excess wear and tear on vehicles.
Here are some pros and cons of leasing a car.
Why should you lease vehicles?
- One of the valuable benefits of commercial vehicle leasing is that you can save a lot of money. Experts advice for leasing a car is usually aimed towards people who want to start a fleet business.
- You don’t have to take care of registration or title of vehicles and simply have to use the vehicle, reducing your admin burden.
- Unlike buying a vehicle, where you have to pay upfront costs, you make monthly payments that can help you uphold a considerable amount of capital.
- You can often replace vehicles in leasing and upgrade to newer models easily by checking business car lease deals.
- For example, when you realise that current vehicles are not offering the best fuel economy, you can lease newer models that ensure fuel efficiency, reducing fuel costs.
- Additionally, a commercial van lease can help you reduce your maintenance costs as they don’t require frequent maintenance and repairs.
- Since leasing is affordable over buying vehicles, it can be treated off the balance sheet.
Though leasing a car through a business seems attractive, it has its downsides.
- You’re restricted within a particular mileage limit when you lease a vehicle. This means the leasing company will penalise you if vehicles exceed the mileage limit.
- You can use our fleet tracking software to monitor the mileage of each vehicle and mitigate the risks of penalty fees.
- You can’t modify anything in leased vehicles as they’re not owned by you. Leasing companies expect the vehicle to be in the same condition as it was given on lease, or else you might have to bear the burden of extra fees.
- Truck leasing comes with higher insurance coverage.
Why should you buy vehicles?
- You have complete ownership of the vehicles when you buy them, giving you all the freedom of usage.
- There’s no limitation on the mileage or wear and tear, and you can keep running a vehicle for as long as you want.
- This also means that you can change vehicles whenever you want (if you have fleet finance), and you’re not restricted to any agreement.
- Fleet businesses can get discounts when they engage in a business contract to hire cars, especially if they purchase multiple vehicles at once.
- Unlike leasing, the depreciation value of vehicles is with the fleet owner. Over the years, the value of a vehicle depreciates, but you can use the depreciated amount to counterbalance profits.
- Fleet businesses earn equity when they own vehicles. This implies that the cost of vehicles is lesser than the value your business has gained over the years. Fleet owners can reinvest the positive equity back into the business.
But buying vehicles also has certain disadvantages.
- One of the obvious disadvantages is that buying vehicles can be expensive over leasing as you have to pay the cost upfront.
- Buying vehicles can also affect your business’s debt-to-income ratio.
- With no mileage limit, vehicles will experience increased wear and tear, increasing maintenance and repair costs.
- And if fleet owners don’t upgrade to newer vehicles, older vehicles tend to consume more fuel, increasing carbon footprint as well as fuel costs.
- The vehicle owner has to go through a lot of admin work–registration, title, taxes, etc. Admin costs should not be neglected as they can affect the business’s profitability.
Besides leasing and buying vehicles, many fleet owners are considering another option: a grey fleet.
What is a Grey Fleet and its Benefits?
- Grey fleet implies that fleet owners use personal vehicles for business purposes, typically using employees’ vehicles.
- Grey fleets can be cost-effective for small-scale fleet businesses as they have to simply reimburse the fuel cost to employees for work travel.
- It can help you avoid upfront costs in buying vehicles and monthly payments in leasing vehicles.
But fleet managers have to track the mileage, use, wear and tear of vehicles to run efficient fleets. Additionally, they also have to ensure that vehicles are in good condition, insurance, MOT, etc.; otherwise, it can pose a threat to employees and vehicles.
- Our vehicle tracking system can help business owners to keep track of all critical information, including driving and idle time, the number of stops, fuel consumption, and maintenance.
- You can even install our dash camera to provide an extra layer of security and monitor the driving behaviour of your employees.
Now that you know the actual differences between car lease v buy and also the emerging trend of grey fleets, you can choose the option that gives you the best efficiency and peace of mind. Our vehicle tracking solution can be used in any of these options to help you streamline your fleet operations.