Car Lease for Business

Choosing if you should lease a car or several vehicles for business is a tough decision to make. There is no universal answer, no certain guide that can tell you whether a car lease is a right thing for your needs. The best you can do is be informed about the reality of car leasing and how it differs from - or matches - your expectations.

If you lease several vehicles, you can hire a car fleet management company to take care of them and keep them maintained and running smoothly, but what exactly can you expect from this process? Read on to find out.

How leasing works

Leasing allows you to drive a car without actually buying it or paying a considerable sum. When you lease a vehicle, you only have to pay regular monthly installments for as long as you keep the car.

Car leases for business tend to last between two and three years, but you may find some offers that last just twelve months or up to five years. Unless your contract enables you to purchase the car at the end of the contract period, you must turn it back over to the lessor.
Benefits of leasing a car

Lower initial cost

The initial cost to lease a vehicle is typically lower than the down payment required to buy that exact vehicle. Monthly lease payments are also usually lower than payments you would have to make to buy a new car. However, if you lease the car, you have no ownership rights, and at the end of the lease, you are left with no equity or residual value to show for your investment.

Latest tech

With each new generation, cars get improved high-tech safety, infotainment, and connectivity features. When you lease vehicles every couple of years, you'll always be able to get the latest technology. With a lease’s lower monthly payments, you may be able to drive a higher-tech vehicle than you would be able to buy. Keep this in mind if staying up to date with technology is important to you.

Warranty protection

Since a car lease tends to be relatively short, your leased vehicle will likely remain under warranty throughout the lease period and, therefore, rarely require anything more than routine maintenance. With a lease, you will not have to worry about any mechanical failures. No matter what, you’ll be covered.

Appearance and brand awareness

One more benefit from the fact that you will be able to change your business vehicle frequently is that it will always be, and look, brand new. This may be an essential factor to consider if your business is part of an industry (such as real estate or insurance) that values appearance, particularly if you need to transport your clients in style.

Plus, having a consistent-looking fleet of vehicles is suitable for building brand awareness, so you should keep that in mind as well.

Deprecation risks

In its first year, a car can lose nearly half of its overall value. If you want to sell the vehicle in the future, this depreciation can spell disaster. When you choose to lease a car, a business lease takes this risk out of your hands. The depreciation is figured into your lease agreement, so you know upfront how much the vehicle should be worth at the end of your lease.

Downsides of car leasing

Mileage limit

Car leases tend to have a maximum number of miles that the lessee can drive per year, known as the mileage allowance. You’ll have to pay mileage charges if you go above the mileage that you agreed in your contract.

Before you consider personal car leasing deals, estimate the number of miles you annually drive. Since the number of miles you're expected to drive is included in the lease, travelling fewer miles than the contract permits is as much of a waste of money as going over mileage. You will have paid for miles you didn't drive, so choose the option that best matches your needs.

Inability to sell

Your business will never actually own the car, so you won’t be able to sell it. Besides, if the vehicle is stolen or declared a total loss, any insurance payments go to the leasing company. You have to start fresh with a new lease agreement, even if you’ve recently paid a substantial sum to start your previous lease.

A lease is tough to get out of

Making monthly payments throughout your lease’s life requires a stable and predictable income source. When you have a lease, it is harder to get out of the contract than it would be to sell a used vehicle. You have car lease cancellation rights, but it can often result in a hefty fee if you end a car lease early.