Leasing a vehicle for your business is a great way to get your business on the road to success and can provide a financially viable solution to get the most appropriate car for your needs without blowing your budget. This article will step you through when it may be beneficial for your business to lease a vehicle.
Where do I start?
Under a car lease, you can pick the car of your choice but it is purchased by the financial provider you organise the lease through in return for payments over a period of time.
Leases are normally arranged to last between 1-5 years. When the lease expires, you can generally continue the lease by exchanging your old car for a new one. Otherwise, you can return it to the financial provider of the lease to be sold. They then consider whether the sale value of the car is enough to meet any shortfall of the original agreement. If it is not, they will then ask you to cover the remaining value. If you can do this, you can take ownership of the vehicle you leased.
What’s good about leasing?
When you lease a car, you don’t need to provide the initial expense that comes with buying a car. What this means is that you have more money at the beginning of your business to spend on other things that you might not be able to otherwise. Leases also come with fixed payment plans, so you know exactly what you need to pay over the long term. You can choose your own vehicle for your business needs, and you can negotiate with the provider what you are willing to pay. A lease also enables you to easily upgrade your car every few years.
Leasing means that you can claim it as a tax deduction when your car is used to help create income for your business. Sometimes you might need to record when you are only using the car for business as you cannot claim the time you use it for personal use, particularly if you are a sole trader. If you operate as a company, however, you can claim the whole amount but you would be liable for the fringe-benefits tax that applies to any personal use of the vehicle.
Are there any problems with leasing a car?
With leasing, you do pay a fixed fee for the entirety of the lease. This means that when the vehicle depreciates, you are still paying for the original value of the car and not the value that it might once have been a few years ago. It will also be more expensive to insure as it is at its most valuable point when you lease it initially. You are also engaged in a contract with the financial provider so if you decide you want to finish the lease early, it might be difficult depending on the terms of the lease and your agreement with the financial provider.
It can also be difficult ensuring you pick a financial provider that is going to provide you with a fair rate. Car dealers often have higher upfront fees and ongoing interest rates. They also can include add-ons you might not want such as payment-protection insurance. Shopping around for the financial provider that works best for your business is essential. Often equipment brokers can help you find a provider with a good deal on a car lease that fits you and your business.
If you need any assistance in determining whether leasing a car or buying a car is best for your business, contact an experienced commercial business lawyer at LegalVision on 1300 544 755 today.