There are many factors to consider when making the decision to buy or lease for your company’s fleet. Leasing has both short-term and long-term benefits, and we will walk you through some of the main differences between leasing and purchasing.
Basically, leasing a vehicle means that you only pay for the portion of the vehicle that you use. Conversely, buying a vehicle means that you pay the entire cost of the vehicle, regardless of your use. Purchasing can provide your business with valuable assets. However, unless your company is cash-rich and can afford to buy your vehicles without financing them, you will pay a higher monthly payment than you would if you were to lease. By leasing, since you are able to spend less each month, your capital can be utilized elsewhere to grow your business.
Depending which type of lease you select, you will earn different financial benefits for your company. With the Closed End (Operating) Lease you can obtain tax benefits by deducting 100% of your lease payments from your income statement. Or, under an Open End (Capital) Lease, you can claim depreciation, and deduct the interest expense from your lease payments.
Incentives and Discounts
Occasionally, you can strike a deal at a dealership. However, when operating with a fleet management partner, like GT Leasing, you can be sure that you will always find discounts and incentives because of the relationships we have built with the auto manufacturers, buying power leverage based on volume, and other negotiated services that save you both time and money.
If you own your fleet vehicles, you run the risk of the vehicles projecting a negative company image. Often, businesses do not have the discipline to replace them on a regular schedule. There is nothing like having your logo on an unkempt, broken-down vehicle to project a negative company image. A leasing program eliminates this risk by expertly timing and managing the replacement process, a valuable advantage to leasing that purchasers often lack.
When leasing from a reliable fleet management partner, you can benefit from many other services, such as warranty issues, maintenance problems, and license and titling administration in various state and local municipalities. A good leasing company will act as your fleet management partner, supporting you and your employees while saving you valuable time and expenses. If you purchase your vehicles, you are in charge of managing the tedious aspects of your fleet, like the vast amounts of data involved with each vehicle, controlling your vehicle inventory, and consolidating invoices and costs.
Lease vs. Reimbursement
It may make sense to let your employees choose and purchase the vehicles they want, and provide them with an allowance or reimburse them for mileage. Although reimbursement can save you the headaches of sourcing, managing and maintaining fleet vehicles, you cannot control the types of vehicles your employees drive, a choice that comes with a multitude of risks, including projecting a negative company image.
Although it may seem cost-effective to reimburse your employees for their personal vehicle use on company time, a commercial lease for your company vehicles can be very cost effective. When working with a fleet management company, you are also provided with additional discounts and incentives that are available due to relationships within and knowledge of the automotive industry.
A car allowance is designed to cover all or a portion of the vehicle’s expenses, including the cost of ownership, interest, depreciation, insurance and maintenance. Generally, a company pays its employees between $500 and $1000 per month. Or, a company can reimburse its employees based on mileage usage, a way to directly pay employees for the actual business use of their vehicles. However, this reimbursement strategy can be extremely time-consuming for both you and your employees.
Company Image and Morale
When selecting to reimburse your employees for the use of their personal vehicles, you have no control over the image of your fleet. In leasing vehicles for your employees, you are able to not only boost the company image, but also the morale of your employees. This is a proven advantage when hiring.
Reimbursement requires your employees to spend time and energy saving receipts and filling out reports, as well as maintaining their personal vehicles. When leasing for your employees, you are able to eliminate those burdens, a factor that increases your employees’ productivity at your company. When leasing, you are able to leave maintenance and other administrative headaches to your fleet management partner, if you choose the right company.