Car leasing may be considered a relatively expensive option, especially when leasing vehicles for personal use, but not for service companies.
Leasing a fleet for your business is a more financially sound decision than buying, for many reasons. We will look at some of those reasons later in this article and discuss how you can identify a good lease. But now, how popular is car leasing?
According to Statista, car leasing is relatively popular in the United States, with one out of four vehicles being on the lease. Besides, the leasing industry accounts for millions of car sales every year, which shows how popular the trend is.
That said, why should you lease a car instead of buying?
Benefits of Leasing a Car
Essentially, buying a car may be cheaper in the long-run, because you get to retain the vehicle, which you can later sell or trade-in, unlike in leasing, where the leaser keeps the car after the lease expiry. But for service companies, this advantage pales in comparison to the pros of operating with a leased fleet. These include;
- Low Monthly Payments
When you lease a vehicle, you only pay the difference between the vehicle's initial purchase price and the residual value. This difference is split into monthly payments that you pay during the lease period. On the other hand, if you were to purchase the car through financing, you would pay higher monthly payments on the auto loan.
The perk in this is that you can write off the lease payments for tax purchases. On the contrary, auto loan repayments are not tax-deductible.
- No Maintenance Costs
Leasing cars for business gives you more peace of mind than purchasing a fleet. Other than insurance, gas, and glass repair costs, the rest of the maintenance expenses are taken care of by the fleet leasing company. They also provide 24/7 roadside service. So, all you have to do is make your monthly payment, then focus on your business.
- Regular Car Upgrades
Leasing allows you to replace your fleet with newer models every few years. You can do this conveniently, unlike in the case of buying, where trade-in hassles can derail your business.
Once the lease contract is over, in say, three years, you simply sign another lease for your desired improved models. This grants you access to a fleet with the state of the art technology at all times. Hence, you're able to adapt your fleet to the changing business needs.
How to Spot a Good Car Lease
As much as leasing is more convenient for businesses, all leases are not equal. Like any other investment, you need to exercise due diligence to land a lease that will support your business goals.
As a matter of principle, ensure you work with a reputable company with a good track record, more so, in terms of reliability and service quality. That said, Edmunds advises that to identify a good lease, you need to look at the down payment, monthly payment, and the allowed mileage.
Further, if a car has a high percentage residual value, which should be indicated on the lease, the monthly payments will be lower. A low monthly fee plus a reasonable mileage quota are in every way an indication of a good deal.
In a nutshell, compare different company offers and seek to know the costs and your privileges. Then ensure you understand the fine details of the lease terms before signing a contract.
At Wilmar Inc, we help businesses like yours acquire and manage custom fleets for smooth business operations. From fleet selection, analysis, management, maintenance, and repair, we shoulder it all so you can concentrate on what matters most - running your business. Ready to lease a car(s)? Check out our offers and let us know what you are looking for.