Vehicles are usually leased from the manufacturer or a finance company.
How much you pay is based on:
- make and model of the vehicle
- how many miles you plan to do
- duration of the lease (usually 2 – 4 years)
How leasing works
Leasing a vehicle is just like renting a flat or a house, you pay a deposit and you get to use it for an agreed period of time and you pay a fixed amount every month. When the agreed time period is up the property reverts back to the landlord.
Car and van leasing is just the same. There is an agreement to how many miles each vehicle will drive and you pay a fixed amount each month. At the end of the agreement the vehicle is returned to the finance company. There is usually a substantial deposit to pay for the first month upfront followed by monthly payments.
As with the rental of a house or flat at the end of the agreement you do not own it or get the option to buy it at a discount. When the car is returned to the finance company it is inspected and you will have to pay out if you have damaged the vehicle. Additional charges will be incurred if you or your employees have exceeded the agreed mileage limit.
Throughout the lease the vehicle remains the property of the finance company. If the vehicle is brand new it will obviously depreciate dramatically in value so when the vehicle is returned it is worth much less. To mitigate this the lease pricing model will take this into consideration to balance the depreciation in value. Basically it’s the price of the new vehicle minus the predicted depreciation plus a profit margin.
Leasing companies buy new vehicles in bulk so they get a better deal on the price of a new vehicle. This means they can offer attractive new vehicle leasing deals which are typically not available to the individual. The bulk buy means they have less depreciation and more profit.
The benefits of vehicle leasing:
- VAT recoverable
- Drive a factory fresh model
- Depreciation of the vehicle is not your concern
- Low initial financial outlay
- Fixed monthly payments
- Full warranty
When sourcing a service provider we recommend giving local businesses priority when possible.
If you plan to buy a product or service for your business in the next 12 months please complete the form below.