Auto Leasing Provides Recession Lifeline

Many businesses traditionally support their transportation needs by purchasing vehicles from local dealers. Being local means that they are ideally located to support servicing and maintenance. Business will usually negotiate a significant discount due to the quantity of vehicles required and the ongoing business they will be providing to the supplier.

The current recession is prompting many businesses to look at alternative ways that they can provide and finance their transport needs.

Accountants and finance departments want to cut costs but, obviously, this must be achieved without any impact on the profitability of the business. Lots or businesses are rethinking the provision of company cars. Instead of providing their executives and sales people with their own dedicated company car, bought from the local dealer, many are turning to business car leasing arrangements. Some are choosing to use a car pool of leased automobiles that can be used by any member of staff who needs a vehicle.

It has been estimated that the leasing approach is saving businesses between 20 and 60% when compared to their previous transport costs.

The same approach has been adopted by many companies requiring commercial vehicles. Leasing vans and trucks is not new to business but was previously primarily used by larger organizations. Many business are resorting to automobile leasing as a way to cut their regular transportation costs during the current recession.

Businesses can really benefit from the many advantages that leasing provides over outright purchase. There are tax advantages for most businesses and the fixed monthly payments help accountants to budget their transport costs.

One of the main disadvantages is that the business never actually owns the vehicles which remain the property of the leasing company. Another potential disadvantage is that you must generally estimate the anticipated mileage and if this is exceeded significant costs can result.

If you are a business, of any size, you would do well to research how much you could potentially save and the advantages that vehicle leasing could bring to your business.

The best option, buy a car or lease a car?

Some people choose to purchase our vehicles and some of us choose to lease them. The question is which is best choice to take, car leasing or car buying?

Look upon a car lease as a long term rental. You do not own the vehicle and at the end of the lease you will then return it and pay any end of lease cost that is due, to complete your contract.

In contrast when you buy a car and pay for it with a loan, the car remains your property at the end of the loan period. If you then wish to buy a new vehicle it will be up to you to trade in or sell the old one.

Most new cars will lose their value as soon as you drive it out of the sales room! It also depreciates with age and as the mileage is larger.

Lease payments will cover just the portion of the cars value that you use during the time you drive it, the depreciation and not its complete cost. Finance charges are added on to your payment.

When buying a car with a loan you are liable to pay back its full cost, plus finance charges. Depending on your deposit or value of your trade in car, this can result in higher payments than for a lease, even if you get a long term loan.

At the end of the lease you may be liable to pay excess mileage fees. A maximum mileage is usually stipulated that you can drive during the lease period. It is policy that you would repay a charge per mile for every mile driven over that limit. However, you can often buy extra mileage at the beginning of the contract at a cheaper cost than you would pay for the extra mileage at the end!

Regarding damage to the car, the leasing company would naturally expect a degree of wear and tear. However the car will be inspected for any damage or extra wear and tear when it is returned at the end of the contract.
A fee would also have to be paid should you elect to end a vehicle lease early.

It is a misconception that the car lease firm takes responsibility for the maintenance of the car during the contract period. You will be responsible for the costs of maintaining the car, as if you owned it.
Warranty repairs will be honoured no matter who owns the vehicle. Usually you will find that lease terms end before a vehicle goes out of warranty.

The best way to try to get an idea as to the deal that would suit you best is to work out how much you would actually be prepared to pay to own a vehicle. Add up the payments you would make on the car and then compare that to the value when the payments cease. Vehicle ownership does not usually make money unless maybe when buying a classic car.

So, is it best to lease or buy?

Leasing:

A car lease might be best if you need a new car every two to three years.
You would obviously prefer to drive a new vehicle but cannot afford to to do so.
On average you drive 15,000 miles or less each year.
You would not be using the vehicle in such a way that it would cause excessive wear and tear.
You are not in a position to make a large down payment.
You use the car for business and can write off your lease expenses.

Buying:

You plan to pay off the car and keep it to avoid loan payments.
You are in a position to pay for repairs after the warranty period has passed
You put more than 15,000 miles a year on a car
You have credit issues and if this is the case it will be easier to buy than to lease
You may intend to exchange it in for another car in less than two years