Leasing for the first time? This article will help you grasp the essentials in next to no time.
Many of you will have rented a car at some point, whether for work of personal use. Provided you used a competent company, we’re sure you’ll agree the process is easy enough.
Leasing cars for business works slightly differently, but it can be just as simple if you know what you’re doing.
To that end, let’s talk through the key points you need to know about leasing a vehicle for your business – it’ll only take two minutes or so.
What’s the difference between leasing and renting?
Car or van rentals usually have a duration of just days or weeks, whereas leases last several years.
Renting is ideal for days out, occasional errands or temporarily replacing a vehicle that’s under maintenance.
Leased cars or vans, meanwhile, can be used in the same everyday roles as a car or van of your own – whether that’s a Transporter van to deliver parcels to your customers, or a Jag to deliver your CEO to meetings.
Why do some businesses choose leasing over buying?
Businesses lease to gain use of vehicles that would cost a lot of money up-front if bought outright. The cost of a car or van could gobble up a big share of budget, and many businesses would rather allocate their capital more evenly.
Even using a loan to buy a vehicle can be financially burdensome. According to the Central Bank of Ireland, SMEs in Ireland are charged an average of 5% interest when they borrow €250,000 from a bank, compared with just 3.3% across most of Europe – so borrowing to buy has a sting in the tail.
Many businesses ultimately decide that leasing is a more manageable alternative, with a relatively low deposit and monthly payments spreading the expense over the full lease period.
Another decisive factor is the rapid depreciation of new cars. While assets like business premises and specialist equipment can gain or hold value, the same can rarely be said of a car or van. This tends to make buying vehicles a relatively unrewarding investment.
Credit is crucial to securing a commercial car lease or van hire
Like any finance-based service, car and van leasing involves a credit-based application process. Businesses with a good credit score will have a great chance of getting accepted; those that don’t may struggle.
Here are a few simple steps you can take to improve your credit, and thereby your likelihood of securing a lease:
Check your credit score. If it’s good already, you probably don’t need to take any further steps.
Make sure you’re up to date on bill payments.
Decrease your credit utilisation ratio. As in, decrease the amount of credit you are using relative to the amount that has been made available to you. Could you do without some of your existing credit-based arrangements?
Dispute any errors. Has a creditor wrongly marked you down as a late payer? If so, tell the creditor they’ve made an error, and ask them to update their records with the Irish Credit Bureau (ICB).
Identify the T’s and C’s that suit your business
As we all know, it’s important to read the small print – but what are the terms and conditions that matter most when you’re trying to get the best deal for your business? We recommend you focus on the following:
Lease duration. This must match your long-term business plan.
Distance limit. A lease will often stipulate the number of kilometres a vehicle is permitted to travel, so it’s important to consider how much ground you need to cover each month.
Modifications. Do you need to have the vehicle modified in any way? You generally won’t be able to make any changes yourself, but some lessors will consider your modification requests and may carry them out for you.
Travelling overseas. Will you be using the vehicle to drive to Northern Ireland, Great Britain or mainland Europe? Some leases allow this; others don’t.
Understanding the terms and conditions of your lease is critical to getting the right deal for your business – so if you’re in doubt about any of your rights or restrictions, ask your lessor before you sign.
The leasing service doesn’t end when we hand over the keys
While car or van rental services simply place the vehicle in your command for the duration of the hire, some lessors offer additional services such as vehicle maintenance and fleet management.
Sixt Leasing devotes a great deal of attention to such services, which can go a long way towards ensuring a lease runs smoothly and successfully.
To find out more about these valuable in-lease services, visit our services' page.