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The basics of business leasing

 Published 2nd August 2021
Company Fleet  General Guides 

Like most things in life, business vehicle leasing is not rocket science. The leasing company is in business to deliver a service that will provide a cost-effective alternative to buying, owning and operating a fleet of vehicles.

The advantage from the customer's perspective is that the business will not have to use capital expenditure to fund the purchase of a fleet of depreciating assets, freeing up capital for the needs of the business.

It can be argued that they won't have the sale value of the vehicles at the end of the contract either, but the business will not have to arrange disposal of the vehicles and will not have the associated costs of a repair and maintenance operation and associated administration costs.

In the process, a business would move from paying to own the vehicles - depending on the size of the fleet, that could represent a large amount of tied up capital which may have very little to do with the company's core business - to paying to use them.

This also provides easy budgeting to aid forward cash flow as a regular amount is taken each month with smooths cash flow pressures.

With the growing number of Clean Air Zones (CAZ) in the UK, a vehicle that is Euro6 compliant would avoid the possibility of being charged to enter a CAZ. Euro6 regulations were implemented from September 2015 for all new cars, which means that the first registered Euro6 vehicles are now approaching six years old. All new cars and vans taken on a business lease would be Euro6 compliant.

The transition to electric vehicles also provides a challenge for businesses. A business lease of an electric vehicle would provide a useful method for a business to evaluate the costs, advantages and disadvantages of operating an electric vehicle for much less than the cost of purchasing an EV. Certainly there are some significant tax advantages for drivers switching to full battery electric vehicles as well as plug-in hybrid vehicles, while the business benefits from reduced National Insurance Class 1A exposure.

The drawbacks? A lease is usually a fixed-term contract and like all contracts comes with conditions. One of these would be that the agreed annual mileage is not exceeded, so consultation with a leasing company such as Gateway2Lease will help set the annual mileage as accurately as possible to avoid any penalty charges. There is always the possibility to renegotiate the contract mid-term if vehicles are showing under-mileage use or are significantly over predicted mileage.

Ending the contract early may also represent a breach of the conditions and penalty charges could be applied, so entering a leasing contract if you don't expect it to complete should be avoided.

Leases come in different types, but a leasing company such as Gateway2Lease will always discuss the best option for you and be clear and transparent about the costs. Answers to the most common questions can be found on the company's Guide to Leasing pages. Other sources of information include the British Vehicle Rental and Leasing Association (BVRLA).

“Business leasing can help companies focus their assets where they are most needed – in running the business, rather than the capital investment required to buy a vehicle fleet,” says Rob Marshall, Operations Director. “In addition, new vehicles leased from us are compliant with all current and known future CAZs.

“Business leasing is also an excellent way to begin the transition to electric vehicles for any business fleet by avoiding the higher purchase costs of electric vehicles. Our experience in dealing with electric vehicles means we can help you plan the most cost-effective route into electric vehicles for your business, ensuring that you choose the right vehicles for the work they will be doing.

“I should also point out that while some of the headline rental lease rates of electric cars appear expensive, on a like-for-like basis taking a whole life cost approach, they are significantly cheaper for the company to run, while offering the drivers worthwhile tax savings.

“If you want further advice, then we can offer our firsthand experience as our fleet is now electric so we are already aware of the benefits as well as some of the minor drawbacks. But whether you choose electric or not, leasing can make a significant difference to your business, and with the addition of a maintenance agreement, the full running costs of the car fleet are taken care of with a single monthly invoice.”

Would you like to know more about business leasing?

We are happy to take you through the key points of business leasing to help you understand how it may assist your business. Please call us on 01299 407 360 and one of our leasing executives will be happy to talk you through the benefits.

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