Commercial Vehicle Leasing: Smart Choices for Growing Businesses
A great way to ensure your business has reliable transport, without a large outlay, can be to lease commercial vehicle. Whether you need a delivery van, pick-up, cargo van or company car leasing can be a great solution for your business. However, you must ensure the right lease agreement for your situation.
Many small businesses and growing businesses will find leasing an option. As you are leasing, you will pay a set amount for a certain time period and adhere to the lease agreement. Knowing how leasing works can help you avoid unnecessary costs and choose the right vehicle for your business.
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How Does Commercial Vehicle Leasing Work?
Commercial vehicle leasing is where your business can use vehicles for a set time period, whilst paying regular payments. Usually the vehicles will belong to the leasing company.
Most leasing agreements are for 2-5 years however this will depend on your leasing company and the type of vehicle you want. At the end of the agreement your business will usually return the vehicle, extend the contract, or if the option is available, purchase the vehicle.
The monthly payments will often depend on:
- The purchase price and anticipated value of the vehicle at the end of the lease.
- Length of the agreement.
- Annual mileage.
- Deposit or upfront payment.
- Interest rates and extra charges.
Knowing what can affect the payment can help you decide on the best deal.
Why Should I Lease Instead Of Buy?
Purchasing commercial vehicles can mean a larger outlay for your business. Whereas leasing can allow you to spread the costs into regular payments.
There are several reasons why a company would choose to lease.
Improved Cashflow
Cashflow is important for all businesses. The money saved from purchasing a vehicle could be used for purchasing stock, paying staff, marketing, purchasing equipment etc.
By leasing your business can save some of this money, as although you will need to pay a monthly payment, it can help you control your transport costs.
Newer Vehicles
Commercial vehicles are an important part of many industries. Companies such as delivery, construction, maintenance and local suppliers will all rely on reliable transport.
Leasing can help you have newer models with improved safety, comfort and modern technology. When the agreement comes to an end, you can also take the opportunity to look at your transport needs.
Predictable Costs
Having a set monthly payment can help you budget and control your costs. Some leasing deals will include servicing/maintenance.
However you should always check what is included. You may still have to pay for insurance, fuel, tyres, repairs etc.
Choosing The Right Vehicle For Your Business
Not always the newest or most expensive vehicle will be the best for your business. It should be the right vehicle for the type of work your staff are doing and what they are transporting.
Consider what you will be using the vehicle for.
Delivery/Transport
Deliveries often means you will need a cargo van or light commercial vehicle, with plenty of storage for your packages, tools and supplies. Fuel efficiency, easy loading and comfortable driving can also affect how productive you are.
If you make lots of deliveries, make sure the vehicle has the right dimensions for your cargo and easy loading.
Construction/Maintenance
Construction companies and maintenance professionals may need a pick-up or larger van to transport equipment, building materials and heavy tools.
Key features to look out for could be:
- Right payload.
- Strong suspension.
- Safe storage for valuable items.
- Right towing capacity.
- Comfortable seating.
Always check the manufacturers specifications.
Smaller Businesses/Professionals
Professionals such as consultants, sales teams, property managers will often need smaller commercial vehicles.
Fuel efficiency, easy parking, passenger comfort and running costs may be more important than cargo space.
Things To Be Aware Of Before Leasing
Although you may think you’re paying a set monthly rate for your commercial vehicle, there can be extra charges.
Make sure you understand what you’re committing to.
Upfront Payment & Monthly Payments
Some agreements will require an upfront payment when you lease a commercial vehicle, however this may mean you’ll pay less per month. However you should make sure you know what the total cost will be.
Also make sure you know if the payments are fixed or can change during your agreement. Are there any administration or documentation charges?
Mileage
Many leasing agreements will have a set mileage limit. If you go over this you may incur extra charges.
For example a local service company will likely have predictable mileage, however a regional delivery company could have much more mileage.
Try to estimate how much mileage you will be doing per year, based on previous data. It is usually better to choose a suitable mileage limit to start with to avoid unexpected charges.
Servicing & Insurance
Commercial vehicles will need regular servicing and checks to ensure they are safe and reliable.
Check if the leasing package includes regular servicing, new tyres, breakdown assistance. Also make sure you know what type of commercial motor insurance you will need.
Never assume anything is included.
Understanding Lease Agreements
Knowing what you can and can’t do with your vehicle whilst on the agreement can help avoid any issues when returning the vehicle. Make sure you read through the lease agreement thoroughly.
Key points to look out for:
Vehicle Condition
Most providers will expect the vehicles to be returned in good condition. Some wear and tear may be allowed however if there is serious damage you may incur charges.
Cancellation
Cancellation of your agreement before the end date can incur high charges. Make sure you understand the cancellation criteria.
Business Use
Make sure the lease commercial vehicle allows you to use the vehicle for your business. Some agreements may restrict how you can use the vehicle, modifications and international use.
Returning The Vehicle
Make sure you understand what happens when your agreement comes to an end.
If there are any parts you’re unsure about, ask the leasing company to explain them in writing.
How To Find The Best Deals
Finding a couple of different providers can help you get the best deals. However make sure you are comparing like for like.
First ask for written quotes from a couple of different leasing companies. Ensure the agreement length, mileage and vehicle are all the same.
Compare:
- Overall Cost – How much you will be paying upfront and monthly.
- Servicing – Is servicing included?
- Mileage – Choose the right mileage limit for your business.
- Delivery Time – How quickly will the vehicle be delivered? Is the model available?
- Damage – What is the damage policy? Will there be any charges at the end?
Sometimes the cheapest monthly payment from different providers may not be the best value. Choosing a vehicle with a slightly higher payment may include helpful services to save you money on other costs.
Final Thoughts
Leasing commercial vehicles can help you get the right transport for your business and spread the costs. It can be a great option if you want to save cash, regularly update your vehicles and have more predictable transport costs.
To make the right choice for your business make sure you know what you need on a daily basis. Compare the vehicle specification, monthly payment, mileage limit, servicing and agreement. By considering the whole agreement you can choose a lease that will help your business.