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When making the decision whether to buy or lease vehicles for your
company’s fleet, there are many factors to consider. There are short
and long-term benefits, and we will walk you through some of the
main differences between the two options.
Financial Benefits
Basically, leasing a vehicle means that you only pay for the portion
of the vehicle that you use, where buying a vehicle means that you
pay for the entire cost of the vehicle regardless. 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 what you select for a lease, as there are different types
of leases, you 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, you can claim depreciation and deduct the interest expense from
your lease payments under an Open End (Capital) Lease.
Incentives and Discounts
Of course you can strike a deal at a dealer on occasion. However,
when partnering with a fleet management partner, you can be sure
that you will always find discounts and incentives due to
relationships built with the auto manufacturers, buying power
leverage based on volume, and other negotiated services that save
you both time and money.
Company Image
When owning your fleet vehicles, you run the risk of the vehicles
projecting a negative image. Often businesses do not have the
discipline to replace them on a regular schedule. Nothing projects a
worse image than to have your logo on an unkempt vehicle broken down
on the side of the road. A leasing program helps with the timing and
managerial expertise in the timely replacement process that
purchasers often lack.
Administration
When leasing from a reliable fleet management partner, you can
benefit from many other services – including items 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 and saving you valuable time and expenses.
When owning your vehicles, you are in charge of managing the vast
amounts of data involved in fleet management, controlling your
vehicle inventory, consolidating invoices and costs and other
services that help keep your fleet running.
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.
Financial Situation
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. Working with a
fleet management company, you also are provided with additional
discounts and incentives that are available due to their
relationships and knowledge in the automotive industry.
A car allowance is designed to cover all or a portion of the
vehicles expenses, including the cost of ownership, interest,
depreciation, insurance and maintenance. Generally you would pay
your employees between $500 and $1000 per month depending on your
employee’s position. Or, you can reimburse based on mileage usage,
directly paying your employees for the actual use of their vehicles
for business. However, this also can be a time-consuming
reimbursement strategy for 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 the vehicles for your drivers, you are able to not
only boost the company image, but also the morale of your employees
and a proven advantage when hiring.
Time Saving
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 take those burdens off of them. When leasing, you are able
to leave maintenance and other administrative headaches to your
fleet management partner if you choose the right company.
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