Leasing vs Buying Fleet Vehicles: What’s the Best Option?
No two businesses are the same. Some businesses depend on leasing their fleet vehicles while others choose to buy or finance them instead. Here are a few points to consider with buying vs. leasing fleet vehicles:
Leasing and buying both have perks in terms of affordability, but for different reasons. Let’s compare:
- Tax benefits: Buying a vehicle can provide your business with potential tax breaks that you won’t get when you lease.
- Equity: When you purchase a fleet vehicle, you can build equity that you can use to refinance the vehicle later or trade in for something new. You don’t build equity in a leased vehicle.
- Depreciation: New vehicles depreciate in value dramatically for the first couple of years after purchasing. If you don’t have much money to put toward a down payment, you could end up with little equity for your purchased vehicle until a few years later.
- Up-front costs: Leasing generally has lower up-front costs, including the first month’s payment plus signing fee, compared to a heftier down payment plus the first month’s payment for a financed vehicle. Purchasing outright requires you to pay for the vehicle in full, making leasing an attractive option for businesses wanting to save money out of the gate.
Warranties and Maintenance
Leasing can potentially be the best option for anyone who doesn’t want to fuss with taking care of a worn-down vehicle after several years of ownership. The same holds true with fleet vehicle leases, which come with warranties that protect each vehicle throughout the term of the lease, or at least most of it.
Most vehicle warranties last three years, which is also a common length of time for leases to last. During the length of the manufacturer’s warranty, the vehicle’s primary components will be financially covered for repairs if they fail because of a manufacturing flaw. That can save your business a lot of money when you have a full fleet to worry about.
Your business needs are, perhaps, the most crucial point to consider when determining whether buying or leasing is the best way to go. Here are a few questions to ask yourself about your business to help you decide:
How many miles does your fleet drive?
Leasing comes with restrictions on the number of miles you can travel throughout your lease term, which could be too restrictive on a business that relies on traveling. Leases average 10,000 to 15,000-mile allotments, with extra miles adding significant costs to your monthly payments or end-of-lease payment.
How often do you need to upgrade vehicles?
If you plan to upgrade vehicles for your business every three to five years, leasing will allow you to do that. The leasing process is often simple and straightforward, letting you trade in your lease for a new, updated vehicle replacement. Financing, on the other hand, is your best choice if you plan to keep your vehicles for several years.
Do you have a dedicated administration department or person to handle paperwork?
If you already have an administration worker or department to handle the paperwork and oversight that comes with your fleet vehicles, then financing could be right for your business. Financed vehicles do require more administration upkeep in terms of filing paperwork, titling, and registrations. The leasing company, on the other hand, will take care of most of this for you when you lease a vehicle.
Does your business put a lot of wear and tear on its fleet vehicles?
Heavy, daily usage of fleet vehicles can cause a lot of wear and tear, which could cause you to pay more money at the end of your lease. Dents and dings, scratches, and a worn interior could trigger a higher lease-end payment than you expected. When you finance, you won’t have repercussions for wear and tear.
Does your business have the time and money to invest in maintenance and repairs?
Maintenance is crucial for any vehicle to keep it in good shape and running to its full potential, but financing a vehicle makes you take on the responsibility of keeping it up to par from the moment you purchase it. Repairs and maintenance also take time away from your fleet vehicle’s usage.
You generally won’t need to worry about the time and money maintenance and repairs require when you lease a vehicle because it’s a new vehicle that’s covered under warranty for the length of your lease.
Is Leasing or Buying Right for Your Business?
Still not sure if leasing or buying is the right way to go for your business? Give Paul Sherry Chrysler Dodge Jeep RAM a call at 937-778-0830. We’re happy to talk to you about your business and talk about your options. You can even browse our selection of fleet vehicles online.