Why do some businesses lease vehicles rather than buy them?
The first and most important thing to understand about vehicle leasing for business is how it can help you cost-effectively upgrade your business vehicle(s)
Buying a new car or van outright is one of the biggest outlays an SME is likely to make – gobbling up a huge chunk of budget that might otherwise be invested in revenue-generating assets and activities. The same applies at scale, as although larger companies usually have bigger budgets to play with, they also tend to need proportionally more vehicles.
Leasing enables companies great and small to replace the considerable one-off costs (or expensive bank loan) of an outright purchase with a manageable monthly fee – so you can instantly equip your team with the brand-new car or van they require, without delivering a knockout blow to your budget.
How does vehicle leasing work?
Let’s rewind for a moment. We’ve now discussed why some businesses prefer to lease, but how does leasing work in-practice?
Leasing is essentially long-term car hire, where agreements last for several months or years, rather than the periods of days or weeks common in car or van rental.
We (the lessor) give you (the lessee) a new car or van for the duration of the agreement, in return for a monthly fee. Big lessors like Sixt Leasing offer thousands of vehicle models from a variety of manufacturers, covering all common business uses – from Transporter vans to sportscars. You get the keys and the car to use as we’ve agreed; and we’ll be there to help if you need us.
A leasing agreement is a long-term B2B relationship, which involves a certain degree of contractual complexity. Terms governing lease duration, distance limit, vehicle modifications and overseas use will all play into your rights and obligations – so we’d urge you to take full advantage of our customer support team and iron out all the details before you sign.
On the flipside, the long-term nature of the lessor-lessee relationship means we’re especially keen to add value for our clients, with added services including insurance provision, vehicle maintenance – and for larger clients, fleet management consultancy.
Our advice: work closely with your lessor to nail the details of your contract at the outset, then reap the benefits of supplementary services throughout the duration of the agreement.
What is it about leasing that puts some businesses off?
Leasing isn’t for everyone, and there’s no doubt some businesses will benefit from buying – especially those requiring specialised industrial or vintage vehicles.
That said, some companies choose not to lease for reasons which are far less valid, as discussed in our article: 5 vehicle leasing myths busted
Foremost amongst these common misconceptions is that buying always makes better business sense than leasing. This may be largely true of premises, specialist equipment and other assets known to hold their value – but the same cannot be said of vehicles. The average car will start to depreciate the moment you buy it, so much so that a new €30.000 car will be worth just €11.417 by the time you’ve had it for five years.
Another off-putting myth about lessors is that we’ll charge exorbitant fees if you damage a leased vehicle. As a matter of fact, lessors entirely understand that a percentage of their vehicles will pick up the odd bump and scrape on the road. For this reason, we insist that lessees take out insurance on their leased vehicle – so damage doesn’t come at a damning price. We can arrange your vehicle insurance for you, if you have better things to be getting on with.
There’s room to negotiate
The first stage of starting a relationship with a lessor is to contact them and request a quote (that’s a free quote, in Sixt Leasing’s case). You’ll soon get a response, after which point you can start negotiating to get the best possible deal on your lease.
Negotiating a vehicle lease is all about knowing what you want from the lessor, and what the lessor wants from you. Make a clear and easily communicable list of ideal vehicle specifics, added services and contract terms. Is your lessor offering these at comparable rates to rival lessors – and if not, can you haggle them down? Further, what can you do to show the lessor you’ll be a great client? A good leasing history and credit score, for example, would both be great bargaining chips.
Now you know the business case for leasing, how leasing works, and how to negotiate your lease agreement, we reckon you’re ready to start leasing. Contact our agents to take the next step.