Leasing vs Buying for SME’s

leasing incentives and vehicle finance

As a business owner, you understand how important it is to keep a handle on expenses and a business vehicle can quickly rinse you of any spare funds you had. What is better for you? Leasing or buying?

For many businesses, the prospect of buying a van isn’t an obtainable one, as they do not have the cash to pay upfront, therefore they decide to lease a vehicle instead. But which option is best? Let’s take a look at the pros each…

Leasing Pros

  • You get to drive away in a brand new vehicle – no second-hand malarkey for you! Most leasing companies only offer the newest models when setting up agreements.
  • You can upgrade to a newer van after each agreement comes to an end.
  • You can set up an arrangement that works for you, in regards to monthly payments and mileage caps – sites such as Lease Van work with businesses to ensure they are signing the right agreement for them, with various arrangements available.
  • There’s flexibility, you can usually work with the leasing company if the model you’ve chosen isn’t right for your business needs. Bear in mind that this varies per company though.
  • Leasing improves cash flow in a business – smaller monthly outgoings look better than one costly expense on the accounts and it improves credit ratings.
  • You can still claim back 50% of your VAT on the finance.
  • You don’t have to worry about depreciation and the loss of value when selling the vehicle on.

Leasing Cons

  • Your mileage is capped at a certain amount and if you go over this you will incur a charge.
  • You will be invoiced for any damages outside of the acceptable terms set by the leasing company. This includes scratches and dents to the body.
  • Insurance rates can be higher, to cover the cost of gap insurance. For example, if you need a van, moneyexpert.com give a comparison of van insurance policies.
  • You will always have monthly payments to factor into your budget.

Buying Pros

  • The vehicle is yours, to sell on when you don’t have need of it anymore.
  • It doesn’t matter if you scratch or damage the vehicle, there will be no one inspecting the paintwork and asking for money to cover the costs of having damages fixed.
  • You can drive as far as you like without worrying about a mileage cap.
  • You have more flexibility when choosing where to have your vehicle serviced and taken for its MOT.
  • You can use your vehicle as part payment for a new one.
  • You can modify your vehicle as you see fit.

Buying Cons

  • Bigger upfront cost.
  • Depreciation of a vehicle means it loses value quickly, usually over the first two years. This could result in you ‘losing’ a large amount of money.
  • Maintenance will increase over time the older the vehicle gets.

There are benefits and negatives when it comes to both options. It’s important you take some time to look at your finances and ensure you are choosing the best solution for you. Watch out for hidden costs, ask lots of questions and drive away with a brand spanking new business vehicle that’s perfect for your SME.