Vehicle leasing is a flexible and cost-effective option for a business that needs access to vehicles, without the burden of ownership.
The business essentially rents a vehicle for an agreed-upon period, typically ranging from 1 to 5 years. Instead of purchasing the vehicle outright, they will make fixed monthly repayments to the lender. At the end of the lease term, the business returns the vehicle, and has the option to lease a new one. This allows a business to use the vehicle for their needs, without tying up a significant amount of capital or dealing with the responsibilities of ownership, such as maintenance and depreciation.
Vehicle leasing offers business flexibility, predictable costs, and the opportunity to upgrade to newer models more frequently.
It's important to carefully consider the pros and cons of vehicle leasing. Consider your business's specific needs and circumstances before deciding whether it’s the right option.
When you’re considering vehicle leasing, choose a vehicle you can afford to lease, so that it doesn’t hurt your business’ cash flow. Considering factors such as the age and make of the vehicle will help to find a vehicle that fits within your budget. You should ensure that you’re able to comfortably repay the monthly repayments before accepting the lease.
Your business credit score plays an integral part of the lender’s decision in offering you vehicle finance. Having a good credit score means that you will be able to access better lease terms and lower interest rates, making the lease more affordable for your business.
When applying for vehicle finance, you’ll need to have documentation ready to present to the lender. Having your last set of filed accounts, business bank statements and basic personal information (such as your address and date of birth) will help to make the process of getting vehicle finance quicker and easier. You can work with your accountant to put these together.
By maintaining your vehicle, you can reduce repair costs and maximise the lifespan of your leased vehicle. Maintaining the vehicle in a good condition not only ensures their efficient performance, but also helps avoid penalties or additional charges at the end of the lease term.
Determine the ideal lease term based on your business requirements. If you need the vehicles for a shorter period, consider a short-term lease to avoid long-term commitments. Or, if you anticipate a longer-term need, negotiating a more extended lease could help you secure better rates.
Ending a lease early typically comes with penalties, as the lender expects a certain stream of payments over the entire term. However, some lease agreements might have options for early termination, often with associated fees.
Customisation is generally discouraged, as you're expected to return the vehicle in good condition. Any modifications that reduce the vehicle's value or require restoration can result in additional charges.
At the end of the lease, you have several options: you can return the vehicle, purchase it at the predetermined residual value, or sometimes extend the lease. Be prepared for any excess mileage or wear-and-tear charges if applicable.
You are generally required to have comprehensive insurance that covers the leasing company's interests. The leasing agreement will specify the insurance requirements.