The vehicles driven by you and your employees can help to project an image of professionalism and success which can in turn influence clients, customers and suppliers in their decision to do business with you.
But should your business rent or buy the vehicles it uses? That’s a big question that only the decision-maker can answer because your business is a very specific thing, and in a very specific stage of its development. You need to ask hard questions and give honest answers, so we will run through the issues here to ensure that an informed decision is made.
Leasing the vehicle
The major benefit of leasing is that because the cost is lowered, the range of models available to you increases. This allows you access to higher performing vehicles than you might otherwise be able to afford. In turn, this helps you to project an image of success, stability and vitality to the outside world.
There are other advantages to leasing. You may not need a big deposit for example, so if cashflow is an issue then leasing a car or van will allow you to start using a vehicle as soon as possible. However, this depends on the deal you get, so shop around and ask a lot of questions of the leasing company.
When you buy a vehicle it becomes an asset. Unfortunately this asset depreciates the minute you drive it off the forecourt and its price continues to fall year on year. This means that you will never get the price you originally paid for it. Seen from this perspective, it’s easy to see why leasing is a good option. You pay less upfront, but because you are never expecting a return from it when you sell - because it’s not an asset - then you do not lose the money you originally invested.
You will not have to worry about maintenance costs if you lease instead of buy as these will be taken care of by the leasing company. The leasing company will normally cover general wear and tear, but you will still be liable for any prangs or accidents, just as you would if you bought the vehicle privately.
You also need to decide who is going to drive your vehicle, and this is less of an issue if you lease. As it is no longer a depreciating asset, you don’t need to worry about wear and tear in the same way as if you owned the vehicle.
You must decide on your business needs however as there may well be charges for going over the established monthly mileage limit, so think carefully about how you will use the vehicle and where.
Buying the vehicle
The downsides here are almost the polar opposite of the benefits.
Whereas an owned vehicle is a depreciating asset, privately owned vehicles don’t have any restrictions on them relating to the mileage or any other general use. This means there aren’t any costs for accidentally over-using the vehicle from one month to the next. This makes planning expenses a little easier.
Because you own the vehicle you are free to brand it as you see fit. You won’t be able to do this with a leased car or van. Branding can be vital for many businesses, so this may a major consideration.
When you go to buy a vehicle, decide on a budget beforehand and stick to it. Don’t get sucked-in to the upgrades and fancy stereo or slick upholstery.
We hope this helps, and good luck with your business venture!
If you need any further advice on leasing a vehicle for your business, contact us at Mayday today!