Many types of businesses couldn’t operate without a company car or commercial vehicle. Whether you work directly in the supply chain or you’re just trying to get from A to B, though, financing a vehicle can be difficult. There are several options available to you, but purchasing and leasing often offer you the most benefits to your company.
The main benefit of purchasing a car outright is that you’ll own the vehicle. This gives you more options during the course of ownership, such as selling the vehicle when you’re in need of cash in a hurry. The vehicle can also be treated as an asset to be used on the balance sheet, which is very useful for SMEs just starting out.
However, purchasing a vehicle requires a significant initial investment whether you’re paying in cash or buying the car over a string of monthly payments. You can expect to pay a deposit of around 10% of the vehicle’s value, though this is fee is typically negotiable. You’ll also have to deal with the responsibilities of ownership, including any maintenance and servicing fees that come up.
Leasing a car works by paying a lender a fixed rate over a number months, usually between 24-60. The ability to spread the payments out over monthly fees means that the business can still remain flexible with its finances, and you can also expect to pay a lower deposit than if you were buying the vehicle. Often times, this gives small business owners the ability to use cars that would normally be out of their budget. This could drastically improve your company image.
Businesses can also reclaim VAT. This includes 50% on a leased car or more on a commercial vehicle, available here. While you’ll still have to pay the cost of insurance, many lenders also include tiers that include maintenance fees. However, because you don’t own the vehicle you do lack some of the freedoms of purchasing. You’ll have to commit to a mileage limit and make sure you follow the company’s fair wear agreement.
Purchasing and leasing offer the most advantages when looking to get your business on the road. If you’re just looking for a short-term solution, though, many companies offer daily or other short-term contracts. This is useful if you’re current business vehicle is away for repair, but you can’t afford for there to be an extended disruption of your workflow.