If you’re a fleet manager and you’re wondering “should I lease or buy my fleet vehicles?” – this is the blog for you.
Read on to discover the biggest advantages and disadvantages of leasing fleet vehicles versus buying your own, so you can ultimately make the right decision for your business.
There are really four categories we’ll break each section down into. They are:
|Typically lower long-term costs when keeping the vehicle over a number of years.
Shows up as an asset on your balance sheet.
Typically lower levels of coverage, which can keep insurance costs low.
|Higher up-front expenditure means a higher barrier to entry.
Outstanding finance used to purchase the vehicle shows up as a liability.
Unpredictable costs on a month-by-month basis with maintenance factored in.
Vehicles depreciate in value, meaning the value of your asset decreases over time. You may eventually be faced with a decision to sell before it depreciates too much, which you’ll have to weigh up against the cost of a replacement vehicle.
|Complete freedom to use vehicles for any purpose and in any way, without any oversight or contractual terms.
No monthly contract means you can replace, modify or sell your vehicle quickly and on your own terms.
|Mileage may be a concern against potential resale value.
Freedom to do things your own way also means accountability and effort lies with you. You may need to advertise company vehicles, source replacement cars, vans or parts, and generally manage the whole turnover of your fleet manually, without support. More freedom, then – but less convenience.
|Owning your own vehicles means no confusion about who is responsible for what. If a vehicle needs servicing, repair, new parts or needs to be replaced, you have full accountability.
If your fleet is running smoothly, maintenance costs may come in lower than a typical leasing maintenance agreement.
|Having full accountability for fleet vehicle maintenance is a double-edged sword. Your fleet manager will need to stay on top of the costs and logistics.
Additionally, when your fleet isn’t running smoothly, costs can skyrocket. This can make budgeting and planning fleet movements particularly difficult and stressful.
If you need one, sourcing a replacement vehicle is often far trickier and a slower process with an ownership model than a leasing one.
|Modern fleet managers have a wide variety of responsibilities, including:
Some fleet managers will appreciate and enjoy the challenge of spinning these plates. For them, an ownership model will be well suited.
Other fleet managers may find manually managing the ins and outs of fleet maintenance, usage and cost an intricate and unnecessary challenge –especially when leasing offers a more convenient and more supportive alternative.
|Lower up-front cost – just sign your agreement and pay a steady monthly fee thereafter.
Regular, predictable monthly outgoings thanks to a fixed-fee contract.
Depreciation isn’t a concern – instead, you can often upgrade to a newer model in line with the terms of your leasing contract.
|Potentially higher costs over the life of the loan.
Not a company asset – so the money you spend is all outgoings, with no potential capital return on the sale.
Possibly higher insurance payments due to the higher level of cover often demanded by insurers on leasing contracts.
|No need to consider resale value – just use the vehicles as much as you like in line with the terms of your contract.
Need to replace vehicles, add more, or scale down your operation? With a flexible enough leasing agreement, you can often do exactly that to suit your business’s ever-changing needs.
|Mileage limits written into leasing agreements can see you incur additional fees if you go over them. This can lead to some careful management and juggling of vehicles and priorities at the fleet management level.
With more inflexible leasing agreements, replacing vehicles quickly can be difficult.
|Leased vehicles tend to be newer and run more efficiently. This means they’re likely to spend less time undergoing maintenance.
Signing a maintenance agreement can mean you don’t need to pay for potentially expensive isolated vehicle alterations, like replacement parts and fitting.
If a vehicle is put out of commission, it’s far easier and faster to get a replacement from the leasing company than it is to purchase a suitable replacement.
|Because leasing providers ultimately own your vehicles, they can specify a strict maintenance schedule you need to adhere to.
Despite not having to pay the larger repair costs, your fleet is still responsible for more common work like servicing and oil changes – so not all of the cost, effort and responsibility is outsourced.
Some leasing contracts may or may not cover tyres – read yours carefully!
|Leasing presents many benefits that can aid fleet managers in their day-to-day work. These include:
Some fleet leasing contracts can be prohibitive and rigid, not offering the ability to change vehicles or adapt on the fly to business needs. Fleet managers must choose carefully when picking their leasing provider and specific contract to make sure it suits their needs – now, and in the future.
Leasing also doesn’t remove the need for fleet managers to understand the ins and outs of their numerous licensing agreements. Indeed, failing to do so, and violating these, can hike expenses unexpectedly.
So, is it better to lease or buy fleet vehicles?
As a provider of leased fleet vehicles, you might expect us to tell you leasing is unequivocally the better of the two options. But the truth is, it really does depend on your needs, and how you run (or plan to run) your fleet.
What we can say is that a little like subscribing to Netflix vs. collecting DVDs and Blu-rays, leasing is often far more convenient. It offers and faster route to market, with lower start-up costs and less ongoing responsibility for your fleet’s vehicles in the longer term.
The job of a fleet manager is never easy, and having the right leasing partner can help take some of the potential headaches out of the role. At SG Fleet, we’re proud that we work with many established fleet businesses, providing vehicles and support to optimise the day-to-day running of their fleet operations.
To find out more about how we can help your business, call us on 01782 337 312 or email CSalmon@sgfleet.com.