Business vehicle leasing offers much more than an alternative financing option. While some businesses choose to finance their fleet vehicles, many are not aware of the cost-savings benefits that leasing provides.
In this article, you’ll learn how businesses like yours can save thousands of dollars by leasing your vehicles, and why purchasing may be costing you more than you realize.
Why You Should Rethink Purchasing Your Fleet Vehicles
If you’re used to purchasing your vehicles, you might think it’s the best route to continue moving forward with. But it’s in your best interest to consider leasing, and bring it into the conversation the next time you need to add or replace vehicles in your fleet.
The truth is, the decision to lease or purchase vehicles is often inappropriately based on a simple comparison of interest rates. While this merits consideration, additional factors influence the overall expense of operating vehicles and should be included in the lease vs buy decision as well.
Comparing the Costs of Business Vehicle Leasing vs Buying
Leasing has lower acquisition costs
If you choose to purchase your fleet vehicles, you’re likely paying more for them than you should. Vehicles purchased off the car dealership lot include additional fees and may come with unnecessary add-ons. Furthermore, during the current vehicle shortage, you might need to settle with whatever vehicle you can find vs. what you actually need in current dealership inventory, which will likely be more expensive (and not the exact make or model) than you want.
A leasing program provides for more disciplined planning. You can look ahead to when vehicles need to be added and plan in advance how you’re going to replace them. Leasing also pairs well with factory ordering, which has many benefits for businesses, including lower prices, the ability to choose the exact specs and features you want, and the ability to order ahead and schedule each vehicle’s delivery date throughout the year.
Compared to financing, leasing also reduces your monthly payment, since you’re only financing the amount of the contracted term for the lease, rather than the complete value of the vehicle. Finally, leasing can provide tax-saving benefits.
Maintenance costs are easier to control with leasing
In most cases, purchasing a company vehicle requires approval for the capital expenditure, which means it often ends up being a lower priority in the overall scope of running a business and controlling operating expenses.
If decision-makers postpone approvals, vehicles will run beyond their optimal cycling points. This leads to excessive maintenance and repair costs, increased downtime, and a diminished trade-in value. Furthermore, businesses may see preventative maintenance on purchased vehicles as a lower priority, resulting in higher maintenance and repair costs when vehicles are run to higher mileages.
These factors all contribute to businesses spending thousands of dollars more than is necessary on running their vehicles. Unfortunately, this excessive spending is often overlooked within an organization, and decision-makers may not even be aware of the extent to which they are overspending on their fleet.
However, when vehicles are viewed as a monthly expense under a leasing program, the approval process for new vehicle replacements is simplified. With leasing, the term agreement of two to five years also makes it easier to cycle out your vehicles before maintenance and repair costs begin to climb. Ultimately, fleet leasing is a tool that provides you with the flexibility of ownership in a way that’s more cost-effective for your business.
Leasing allows you to continue to borrow funds for your business
When you use internal funds or credit lines to purchase your vehicles, you end up missing out on several financial opportunities for your company:
- Any internal funds you use will be tied up in the asset, and won’t be able to grow interest.
- Your borrowing ability will be reduced since all your capital will be tied up in depreciating assets.
- The internal funds could be better spent elsewhere within the business.
Leasing allows you to free up this capital, which contributes to the overall health of the business. Having accessible capital helps businesses run more efficiently, grow, and gives you a buffer for when unexpected costs arise.
Leasing helps improve resale values
A vehicle’s condition at the time of resale is a major influence on how much it will be worth to a buyer. If there is additional maintenance throughout the vehicle’s time in your fleet, its resale value will drop significantly.
Leasing and proper fleet management facilitates regular maintenance and allow you to cycle vehicles out of your fleet at the optimal time when depreciation costs are still low. The result is higher resale values and a higher ROI for your business.
Leasing a Vehicle for Business Through a Fleet Management Company
A fleet management company (FMC) is a partner that can structure vehicle leases in a way that suits your unique business needs. Not only that, an FMC provides complementary programs designed to increase efficiencies and lower your total costs of ownership, such as maintenance and fuel programs, vehicle title and registration, accident management, and more.
Ultimately, leasing is a strategic tool your business can use to lower your acquisition and operation costs while increasing your fleet’s resale value. Used properly, it has the potential to generate thousands of dollars in savings for each vehicle in your fleet.
Would you like a free, personalized cost-savings estimate for your fleet? Check out our fleet cost calculator tool underneath the author section below. It takes about five minutes to complete, and you can do it all on your own, right here on our website.