Starting a business can be surprisingly expensive. Oftentimes, you find yourself having to lay down significant amounts of investment capital before you have even begun trading. If your business model depends on the use of a business vehicle this is likely to be one of the largest expenses you face during the startup phase. Whether it’s a car, a van, or even a minibus, securing a business vehicle can be an expensive proposition.
You can always buy a vehicle outright if you are in a position to do so, of course, but you also have the option of leasing the vehicle and making monthly payments instead of paying a large lump sum.
What’s the Difference Between Buying and Leasing?
When you buy a vehicle, it becomes your property, you own it outright. On the other hand, if you lease a vehicle then you pay a certain amount each month to use it. It’s akin to the difference between renting a flat and buying it outright.
If you want to buy a vehicle outright then you will either need to pay for it upfront or you will need to take out a loan on it. This may involve monthly payments towards the cost of the vehicle in a similar way to a lease, but with the difference that these payments go towards the overall cost of the vehicle and you will own the vehicle at the end of it.
Leasing is more like renting the services of the can each month. Typically, the monthly costs of a lease will be lower than the costs of monthly payments towards ownership, but the lease payments will go on for as long as you want to use the vehicle.
Why Buy a Vehicle?
When you buy a van outright you will own it completely, giving you complete freedom to do with it as you wish. As long as you can keep it full of petrol, appropriately insured, and properly maintained, you can drive whenever and wherever you like.
Of course, this also means that you will be responsible for making sure that you keep the tank full and ensure that you keep up with repairs and maintenance. You will also need to make sure that the vehicle has the appropriate insurance on it.
Let’s say that you’re buying a van for your business. You will need to factor in the cost of insuring the van as part of your calculation. Fortunately, finding van insurance is easy – this company can help you get insured. Quotezone is a price comparison website that will help you to get a quote for various forms of insurance. They can also compare a range of business-related insurance types, so they are a useful resource for entrepreneurs.
Why Lease a Vehicle?
If you don’t have enough capital to invest in buying a vehicle outright then leasing can present you with a viable alternative. You don’t need to have as much cash on hand to start leasing; that cost will be spread over the length of your contract instead. The leasing company will also handle the majority of the routine maintenance tasks that arise from general wear and tear.
Some leasing agreements will come with the option to buy the vehicle at the end. Alternatively, you might want to move on to a new leasing plan on a better vehicle. This is similar to the way most of us approach our mobile phone contracts.
Another advantage to a leasing agreement is that you will be able to claim back VAT on your monthly payments at a rate of up to 100%, provided that you have already registered your business for VAT and that the vehicle is only being used for business; it can’t be your personal vehicle as well.
Choosing the Right Option
The best option for you will depend on your individual circumstances as you prepare to begin your business operations. If you can easily afford to buy the vehicle outright then it usually makes sense to do so. You also need to factor in the cost of insurance and make sure that you have some left to spend on expected and unexpected repairs.
If you don’t have that much capital to invest in your business vehicle, leasing can enable you to get access to the vehicle you need at an affordable rate. You can always start with a cheap, basic, and relatively short-term lease while you get your business established. Once you are turning a profit, you can then upgrade to something better.
If you are able to buy your vehicle outright, you will have complete and total freedom, at a price. But if this isn’t feasible, you can always lease a vehicle for a while and save up to buy one. Leasing enables businesses and individuals to access the vehicles they need at a more affordable rate, and also takes off some of the pressure of having to keep the vehicle properly maintained.