Whether you need one car or a fleet of vehicles for your business leasing may be the right option. There are several commercial finance options for purchasing vehicles for business use, however, leasing is the most common and will be the focus of this article. We will look at what vehicle leasing is, the terms and conditions, benefits, and drawbacks, to help you decide if leasing is the best option for your business.
What is Leasing a Vehicle
Leasing is a type of asset finance. An asset is a tangible item that is necessary for business, and asset finance is any type of commercial finance that allows you to pay for that item. There are different types of business lease that can be used for cars, vans, and other vehicles. The type of lease that you choose will be dependant on whether you ever want to own the vehicle, whether you want maintenance included, and how many vehicles you require. The main types of vehicle leasing available are:
- Business contract hire
- Contract purchase
- Finance lease
- Fleet management
Business Contract Hire
This is the most common type of lease utilised for business vehicles and can be used to purchase cars, vans, smaller trucks, and SUV’s. If you require heavy duty commercial vehicles, you will require an alternative type of asset finance via a more specialised lender.
Key facts for business contract hire:
- Small initial deposit
- Fixed monthly repayments
- Terms from 24-60 months
- Optional maintenance packages
- Variable mileage depending on requirements
- Excess mileage fees where applicable
- No option to purchase the vehicle at the end of the period
- Brand-new vehicles only
- May be able to reclaim VAT
For a hassle-free way of purchasing one or a small number of vehicles for business use business contract hire could be the solution for you. The cost of the lease is based on an estimated value at the end of the rental period considering estimated annual mileage. This means that there is no risk of deprecating value, and due to the higher resale value that is maintained often allows for a more premium level of car to be purchased for a lower cost.
This type of lease deal is available for organisations of all sizes and can also be utilised by private users. Although businesses that can reclaim the VAT costs are most likely to find this type of finance to be the most cost effective. Speaking with a broker such as MC Commercial Finance can help to explain the options and what would be most viable in your individual circumstances.
If you would prefer to retain the option of purchasing the vehicle at the end of the term, then contract purchase may be a better type of car finance for you.
Contract Purchase Key Facts:
- Variable initial deposit
- Fixed repayments
- 24-60 month terms available
- Balloon payment pre-agreed for end of term purchase
- Optional maintenance included
- Estimated mileage and excess fees apply
Due to the optional balloon payment at the end of the term, the monthly repayments are kept relatively low while leaving open the option to retain the vehicle. For organisations that don’t have a clear strategy for replacing vehicles or that are unsure of future requirements contract purchase may be the best strategy, once again booking an appointment with a broker can provide a wealth of information about the best type of commercial finance for your business.
A finance lease is another type of lease in which the business retains risk of the resale value of the vehicle but also retains the option to purchase at the end of the term. This type of lease provides a high amount of flexibility for organisations, however, also comes with more risk than for other types of leasing. The payments can be lower; however, you may find yourself with a high final payment or vehicle with low resale value at the end of the term.
For larger organisations with multiple vehicles, you may wish to look at a fleet management solution. Fleet management takes all the worry about company vehicles out of your organisation. From organising the rental, delivery, and return, to maintenance and fuel cards, toll payments, and even parking or speeding tickets a fleet management company will take care of it all.
Let’s Discuss Your Business Leasing Requirements
Contact us at MC Commercial Finance today to book an appointment to discuss the best vehicle financing solution for your organisation. Vehicle leasing doesn’t need to be complex; we can help you to decide on the right type of lease deal for your requirements, identify suitable lenders, and help you through the application process. Whether you need to lease a single car or a fleet of 10 or more, send us a message now.
MC Commercial Finance Ltd is authorised and regulated by the Financial Conduct Authority
(Reg number 948719).
MC Commercial Finance Ltd is an independent credit broker not a lender.
Company Registered Number: 12472873