Launching a new business is an exciting time, but there are many decisions which need to be made that can make things a bit more stressful. Deciding whether to rent or buy a business vehicle or vehicles is just one of those dilemmas.
In this article we look at the advantages and disadvantages of both leasing and buying.
Buying a business vehicle
The most obvious drawback of buying a vehicle is that it can be expensive. You will generally need to have the cash required to purchase the vehicle up front, or take out some kind of loan to finance it. When you’re launching a new business you’re likely to have a lot of other expenses and so your budget may not stretch to buying a vehicle outright.
You should also bear in mind that a vehicle begins to depreciate in value the moment you drive it away from the forecourt, and so you won’t recover the full cost (or anywhere near the full cost) of the vehicle when you come to sell it. The AA estimates that by the end of its first year, the vehicle will have lost 40% of its original value. Don’t forget that you’ll also have to pay for any repairs that the vehicle might need.
There are of course advantages to buying a vehicle. Whilst as mentioned the vehicle will depreciate in value, it is still yours and you will be able to sell it should you or your business need a quick injection of cash.
As the vehicle is yours, you are free to do what you want with it in terms of its appearance. This will be particularly useful if you’d like to brand your vehicle with your business name, logo, address etc. It is also useful should you need to modify the vehicle to suit your business needs – for example, by installing special storage facilities for your business’s tools and equipment in the back.
Another potential advantage is that you may be able to claim the cost of the vehicle against your income tax bill as a capital allowance; you should speak to your accountant about this.
Leasing a business vehicle
Unlike buying a vehicle, when you lease you do not need to have access to a large amount of cash up front. Generally all you’ll need is a deposit and then you’ll pay back the rest throughout the life of the contract. Companies like Mayday Vehicle Rentals even offer flexible rental terms, where unlike a lease you are not tied into a lengthy contract. Should your business circumstances change, for example if you have a gap between lease cars, have new employees or just don’t want your capital tied up, then companies like Mayday are perfect for you.
Leasing or renting a vehicle also means that the vehicle’s maintenance costs are usually covered; if the vehicle breaks down or needs pricey repairs, those costs are the responsibility of either the leasing or rental company and you will not be hit with hefty bills.
You may even be able to buy the car or van at some point, should your circumstances change and you want to take ownership of the vehicle – ask about whether the leasing company offer a lease purchase agreement.
Whether you choose to lease, rent or buy, we wish you all the best with your new business.