Most businesses find that company car leasing is a much better option in comparison to out-rightly buying the vehicle. Also known as ‘contract hire’ this kind of leasing involves the renting of a vehicle by a specific company for an agreed up period and mileage.
This agreement allows the client company to pay a fixed amount of money every month to the leasing company. The client company chooses how long it wants the lease to run for and once that term elapses, it either renews the contract or simply hand the car back to the leasing company.
The main advantage that this kind of arrangement brings to the client company is that they have a fixed expense that is associated with the leased vehicle. They only need to insure it, pay associated taxes and fuel the vehicle. This is a more ‘constant’ figure as opposed to buying a car that comes with a host of expenses including the purchasing price.
As much as the fixed costs associated with company car leasing are the most attractive feature of this kind of arrangement, there are other aspects that come into play. Aspects that make this arrangement worthwhile for client companies. The thumb of rule is that a vehicle depreciates the moment it is driven out of the forecourt. This essentially means that vehicles are a serious liability to a business; necessary and convenient, but financial liabilities. By leasing a vehicle, you avoid transfer this depreciation to the leasing company. Basically saving yourself a great deal of money.
Another associated advantage is that small businesses do not have to deal with the many overhead costs that come with owning a fleet of vehicles. Businesses that need vehicles to operate often need to have an administrator who handles and coordinates these vehicles.
This often requires the installation of fleet management software, buying and selling new and old cars respectively and incurring insurmountable servicing costs. With leased vehicles, depending on the kind of contract and agreed upon terms, the client company almost never has to deal with servicing cost and the leasing company always have fleet management software installed in all their vehicles. All the client company has to do is pick up the car, use it and hand it back in upon the completion of the agreed upon period.
Tips on company vehicle leasing
– Always ensure that you know exactly what you are going to be paying for. Just like with any contract, read the fine print.
– Be clear about the maximum mileage allowed per month and the penalties involved should you go over that set figure.
– Find out if there is a termination charge involved should you need to hand the car back in early.
– Find out if there are any additional insurance policies that you need to take up.
Company car leasing is one of the most cost effective methods through which companies keep their employees on the move. It is however imperative that the vehicles leased be in the best possible condition and written down agreements be clearly stated with no room for assumption or expensive errors on either side.