5 Key Advantages of Leasing over Purchasing
Many companies struggle with the decision between purchasing and leasing their vehicles. Like most decisions, there are a multitude of factors to consider, with pros and cons on both sides. In this article, we’ll take a look at some of the key advantages that leasing offers when compared to purchasing.
Improved Cash Flow
When compared to leasing, purchasing vehicles can restrict large amounts of capital for a long period of time. This is true regardless of whether your company purchases the vehicles outright, or finances them. If buying the vehicles outright, you’ve tied up the entire cost of the vehicle. If financing, you’re out the down payment amount, plus the monthly payment (which will be significantly higher than a monthly lease payment since with a lease, you’re only paying for the portion of the vehicle which you use). As a result, purchasing leads to decreased flexibility, the company has less cash on hand to re-invest into the business or respond to opportunities that may arise.
Decreased Administrative Costs
A company who elects to purchase their vehicles is going to have a significantly higher administrative cost compared to those who lease. This is because of the time that will need to be dedicated by the company who purchases to handle things such as licensing and registrations, renewals, maintenance, insurance, tickets and violations, accidents, etc. Leasing vehicles allow for those everyday tasks to be passed off to your fleet management company so that your employees can spend more time focusing on your core business and less time managing the daily hassles of the fleet.
Decreased Acquisition Costs
Leasing vehicles, specifically through a fleet management company, is going to result in a substantial savings when it comes to acquisition costs. This is because many fleet management companies have relationships with manufacturers and dealers that allow them to offer additional incentives above and beyond what is available to the general public. Additionally, leasing with a fleet management company allows your company to place their orders directly with the factory as opposed to purchasing off a dealer’s lot. The company is able to avoid paying dealer markup and fees that they would otherwise be charged.
Predictable Life Cycles
An issue that many companies who purchase vehicles have is that they are unaware of the most efficient time to cycle out their vehicles. They often are left with outdated vehicles whose physical life has exceeded their economic life. These vehicles are often in poor condition both mechanically, and aesthetically. This can result in a significant cost to the company just to keep the vehicles road-worthy. With leasing, vehicles are cycled out on a pre-determined schedule based on your usage habits. This allows for vehicles to be replaced before costly maintenance work becomes necessary. It also means that drivers can be placed in late model vehicles with the latest technology, thus enhancing your company’s corporate image.
Ease of Disposal
Another problem with purchasing a vehicle is that when it comes time to replace it, you have to figure out what to do with the old one. We’ve encountered countless companies who have vehicles just sitting idle in their parking lot because they don’t know what to do with them. While you could look to sell the vehicle yourself, that can take a lot of time and effort. When leasing through a fleet management company, they handle the disposal of the vehicle for you. Additionally, if they’re selling it on your behalf, their remarketing specialists will be able to analyze the market to develop a disposal plan that will maximize your return.
When evaluating the choice between leasing and purchasing, there is no concrete answer. Each company’s situation is different, and there are many factors that will need to be considered during the decision making process. If you’d like to discuss whether or not leasing may be right for your company, give us a call at (800) 243-0182 or email us at email@example.com.