Many business owners prefer leasing a company car for their business. According to research, the car leasing market is expected to grow exponentially.
Car leasing allows your business to afford an appropriate and reliable car at a much lower cost. It also allows you to change cars frequently, making it easier for your business to keep up with the changing demands, technology, and safety features.
With car leasing, you can effortlessly find the right vehicle for your business without blowing your budget or going through the hassle of car ownership. However, before leasing a car, you should first check whether a car lease is what works for you. Therefore, there are numerous factors you should consider before reaching your decision.
So, are you considering leasing a company car for your business? Here are things you should know before leasing a car for your business.
Decide on the Right Car Model
When leasing a car, you'll have a wide range of options to choose from. This makes vehicle selection a necessary process. You should analyze your needs and narrow them down to the type and brand of car that can resolve your issues. You should also consider your budget. Given how difficult it is to settle on the right vehicle to lease, you should let a reliable fleet manager help you. They can help you by managing your desired car's specs and recommending the makes and models to suit your business needs. Fleet managers also ensure that you choose what meets the requirements of your business.
The Type of Lease Offered
When leasing vehicles, you can choose either an open-end lease or a closed-end lease contract. In an open-end lease, you'll pay for the difference between the residual value and the actual resale value after your lease expires. On the other hand, you'll only pay for the extra mileage and excess damages.
The Lease Term Length
Before renting a fleet for your business, you should know how long the lease will last. Generally, you'll pay more if you choose a short-term lease over a long-term one. This is because the residual value of a vehicle depreciates much faster in the first 24 months. Therefore, you should consider going for a more extended lease period whenever factors/business needs allow, lowering monthly fees.
Annual Mileage of Your Leased Car
Technically, every car leasing contract has an annual limit mileage. This is the number of miles you can drive the car each year, mostly 10000 to 15000 miles. Before you reach your car lease agreement, you'll have to estimate and agree on the annual mileage for your car. If you surpass this limit, you'll pay an extra charge for the additional mileage used. Therefore, before letting, you should first know your driving patterns. Suppose you find it difficult to stick with the agreed mileage; you should pay for a higher mileage limit to avoid running into issues. The charges for extra mileage vary from car to car. You can always check with your fleet management company to determine the most suitable one.
The Vehicle Residual Value
A vehicle's residual value is the car's value at the end of the lease. This can also refer to the amount of money you would pay if you chose to buy when your lease expires. The residual value depends on the car's depreciation rate, which varies based on the type. The longer the lease period, the lower the residual value of the vehicle due to depreciation over time.
Typically, you'll pay a lower monthly payment when a leased car has a higher residual value because its depreciation costs will be much lower. You should, therefore, have an estimate of the car's residual value before leasing it to ensure that you have the right car for your business.
The Vehicle Cost
When you lease a car, you'll make monthly payments as agreed in your lease contract for the given period. Hence, you should know how much money your business will spend on your leased car. When you choose a cheap car, you'll pay lower monthly payments than expensive ones. You should choose a car with an affordable monthly payment that matches your budget. This will help you avoid late payment fees that could cost your business more than expected.
Consider Any Extra Charges
It would be best to keep in mind that some companies require a down payment, while others don't when you sign the lease. A higher upfront fee will lower your monthly payments. However, you should know how much you're willing to pay before renting. You should also look at the extra fees, registration costs, and taxes. When it comes to matters of finance, as a rule of thumb, you should strike a deal that saves you more money.
In addition to that, you should also consider the cost of depreciation. Depreciation refers to the difference between the car's value and its residual value. In your lease contract, you'll be required to pay the depreciation charges. Therefore, you should choose cars that can retain their value.
Choose Wilmar Inc. For Your Business Car Leasing Needs
There are many pluses that come with leasing a car for your business. Wilmar, Inc. is here to help you find what fits you and your business needs. With years of experience in the car leasing industry, you should let our experts fulfill your fleet leasing and management needs.
Get in touch with us now so that we can help you improve your fleet's efficiency and operate your business more effectively.