In the current economic climate, many businesses are opting to hire or lease their company vehicles. But why do companies choose this option, when they can own the vehicle outright?
When a business opts to lease a car, they are essentially renting the vehicle for the long-term, along with a suitable maintenance and repair plan that forms part of the monthly, fixed payment. Businesses that opt to rent a vehicle are therefore able to predict monthly budgets more effectively, due to the fixed costs of such a contract.
Many UK businesses elect to lease their company vehicles so that they can free up some of their working capital and redirect the funds into more important core business activities. It has been rightly suggested that possessing assets that depreciate in value over the short term is not good business practice. Therefore, if a company chooses a finance leasing option, they would see the valuable tax incentive available and, after repaying a low monthly cost plus interest over a specified period, they need only make a final payment at the end of the lease based on the value of the vehicle.
Car leasing and contract hire facilities are also available to private individuals, giving them the option of purchasing the vehicle outright at the end of the leasing period or handing the vehicle back - this plan is very attractive if individuals want to update their vehicles on a regular basis.
It could therefore be said that leasing is a much safer, risk-free alternative to purchasing a vehicle - not just for businesses, but private individuals as well. Always consider your options before agreeing to a loan to finance your vehicle, or using company assets to buy a car outright. The likelihood is that renting is a much safer option for you and your business.
Member since: 2nd July 2010
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