One of the biggest reasons from businesses failing is the lack of cash flow. On paper businesses are solvent, but delayed money coming in often can reverse the fortunes of a growing enterprise. So what happens when this business needs to have a fleet of vehicles to do their business, or in smaller enterprises a company car, so the right image is portrayed to its customers?
Well the business can take thousands of pounds off the bottom line by purchasing their vehicles outright, reducing the amount of useable money within the business, or it can consider leasing a car (or fleet of) where any initial investment is only a fraction of the full value of the vehicle.
Montly Payments Are A Legitimate Expense
The business can then pay via monthly payments that just like a purchase can be claimed as a legitimate expense within the accounts. Other taxes such as VAT, are claimed back to a level determined whether the vehicle is also used for personal use or not. 100% of the VAT can be claimed back if the vehicle is 100% used for business and is stored at the place of work, but if the car is stored at a personal home and is even used for transport to and from work, then only 50% Of VAT can be claimed.
The key to this argument is the cash that is left in the business can now be used to grow the enterprise, to market, to invest or for its survival. So leasing a car rather than buying within a business environment, is not just about improving image and having a better driving experience on the way to work and customers, but a shrewd financial one.
Cost Of Lease Not Alway Related To Purchase Value
Another factor to consider, is the monthly payments of any vehicle is not 100% related to price of buying . The key factor in the leasing price of a car is its depreciation over a set period of time and as most vehicles depreciate at different levels, it is very possible to lease a better branded car cheaper or at the same cost of lower valued example. In fact the reason it is popular in the UK to lease certain German executive cars is they have a lower depreciation against other examples. Even within these sought after badges, there are derivatives that hold their value better and so there are certain models that can be as cheap to lease as other models that are more expensive to purchase outright. Clearly car lease is a financial decision and like all money matters, should not be taken lightly and the relevant advice sourced from professionals. But for businesses wishing to improve their cash flow and want (or need) to keep more money in the business considering the option to lease vehicles rather than buying outright, should at least be investigated, to see it is right fro them.
Mark Flanighan loves writing about cars and owns and runs Leasebam an online resource that helps individuals and business get completive prices for their next leased vehicle.