Businesses prefer to lease their vehicles rather than buy them outright for many reasons but usually it comes down to the financial advantages leasing provides. We all know that monthly vehicle leasing is more affordable than buying on HP but there are further financial implications that make leasing a more attractive option.
The major benefit with vehicle leasing comes in how it is accounted for.
With vehicle leasing, the costs are an operating expense just like the lease on your office space. The vehicle is not a depreciating asset on the books but a 100% tax deductible expense. This enables the business to stretch its dollar further and be driving either new or late model vehicles, which may not have been affordable with HP finance.
Vehicle costs are a big expense for many businesses and often they can’t or don’t want to write out a cheque for tens of thousands of dollars taking valuable capital out of the business. Smart businesses opt to keep their capital in the business where it can be used for growth and lease their vehicles instead.
Many business owners like driving new cars, it’s good marketing and makes them and their brand look good.
However, not all vehicle leases are created equal. It pays to read the fine print and make sure the lease is flexible enough to adapt to your business’ needs. If your business is in growth mode, the vehicle you need today may not be the same as you need in 2 years time. With a flexible lease it’s easier to be driving a new car every few years without being locked in for the duration of the term or paying a hefty penalty for breaking the lease or doing too many kilometres.
If you’re investigating vehicle leasing for your business, give us a call to talk through our flexible SmartLease and how it could work for you.