Some people may tell you that it’s too hard to get a good deal leasing your fleet vehicles. Others may tell you that purchasing a new vehicle is one of the worst investments you can make.
There are a number of factors at play that will inform your decision on leasing your fleet vehicles — from ease of convenience to the status of your business’ balance sheet. The popular consensus is that leasing requires less administration and has minimal impact on your company’s books. Meanwhile, purchasing your vehicles will require more planning but may ultimately save your business money in the long run.
Let’s determine what your best path is by taking a look at some of the pros and cons of leasing and buying.
Leasing Your Fleet Vehicles — The Pros and Cons
Leasing your fleet vehicles can essentially be thought of as outsourcing. You’re likely already doing this with other aspects of your business — like your computers.
Like other leasing deals, the primary benefits of leasing your fleet vehicles include convenience (someone else is responsible for sourcing and maintenance) and that you’ll secure a relatively new vehicle. The minimal initial capital expenditure of leasing plus predictable maintenance costs will also bear little impact on your company’s balance sheet.
On the flipside, leasing means you won’t have as much autonomy over the vehicle (someone else owns it after all) and it may cost you more money in the long run than a straight-out purchase. Also, while not having to worry about maintenance is certainly convenient, most lease agreements will penalize you for excess mileage and what might be considered minor damage to vehicle.
Owning Your Fleet Vehicles — The Pros and Cons
Now let’s examine the ups and downs of owning your fleet vehicles. Ownership means that you can take advantage of your vehicle’s depreciating value over time. These deductions in turn can be used to offset profits.
You also won’t need to worry about mileage or if your vehicles get the occasional dents as you do with the leasing route. Then again, selling a beat up vehicles with high mileage will take much more administration time than simply handing it over to the leasing dealership.
Determining Which Direction to Take
There is no right or wrong answer when it comes to leasing versus owning your fleet vehicles. What is important is that you ask the right questions for your business.
Begin by asking yourself what you’re trying to accomplish out of your fleet model. Less administrative overhead? More cash flow? Or more control over your vehicles? Your responses to these questions should help guide you more clearly towards either leasing or owning your fleet vehicles.
In your analysis, also be realistic about your business’ ability to handle the “soft costs” of ownership. Place a dollar value on the time it will take you and your employees to negotiate, purchase, maintain, and sell your fleet vehicles.
If you don’t have much experience acquiring and maintaining fleet vehicles, you may best be served by going the leasing route. If you choose to do so, be sure to leverage your ability to refer the leasing company to your business network as this can be a powerful negotiating tactic while setting up your leasing terms.
On the other hand, if you have confidence in you and your team’s ability to source and maintain a fleet of vehicles, buying quality pre-owned vehicles may be your best bet.
This brief blog post is certainly a simplistic take on the leasing versus buying decision and does not account for the nuances of every business. But if you’re a small business with limited expertise in this area, then hopefully this post will get you pointed in the right direction.
You may also want to look a installing a telematics fleet tracking solution to keep your operations running smoothly. We would be happy to show you how GPS Fleet Tracking can keep your customers happy while saving you money on your fleet vehicles.