Should You Lease Your Business’s Vehicles?

Your business needs a vehicle for daily operations. You’ve done your research and decided on the size, miles per gallon, and features you need. You are ready to start visiting lots and consider your options.

But have you decided how your business will finance the vehicle? Is it within your budget to invest in owning a brand–new auto? Maybe something used? Or maybe a lease is the better option?

Leasing a commercial vehicle is common and could be the right move for your company. We’ve identified some pros and cons of leasing a vehicle for a business:

Pros:

• A lease is usually cheaper in the short term than the full purchase price of a new car.

• Compared to a short–term rental, the years–long agreement to lease a vehicle may be beneficial for the long–term operations of your business. Consider how long you’ll need the vehicle before signing that agreement.

• Many leases include maintenance and repair coverage in the contract, potentially reducing your business expenses.

• A lease can allow more flexibility than an outright purchase. For example, you might want to test out a vehicle for a year before making a purchase.

• Operating your business using leases helps you keep your vehicles up–to–date with the latest safety equipment, tools, and comfort settings.

Cons:

• A lease often includes limits on how many miles you can drive in a year. You could pay extra if you exceed your allotted mileage.

• A leased car needs to be returned in its original condition, which means no permanent customization of the vehicle.

• You own no equity in a leased vehicle, unless you participate in a lease–to–own agreement.

• Leasing can be more costly in the long–term than purchasing.

• If you need to cancel your lease early for any reason, you may face penalties.

If you do choose to lease your company’s new vehicle, take care to do your research. Carefully review the terms of the lease:

• Monthly payments and fees

• Lease duration

• Terms

• Included services

• Lease–to–own agreement, if applicable

Insuring a Commercial Vehicle

Whether your business rents, leases, or owns its vehicles, you will need commercial auto insurance. Commercial auto insurance can provide loan/lease gap coverage. If the vehicle has comprehensive and collision coverage, loan/lease gap insurance pays some or all of the difference between the balance of your lease and the claims payout for a covered total loss.

References
Commercial truck leasing: An intro for business owners (n.d.). Indeed for Employeers. indeed.com
Commercial vehicle lease (n.d.). Contracts Counsel. contractscounsel.com
Lease vs. own: How do you choose? (n.d.). Penske. pensketruckleasing.com
What costs are involved in commercial truck leasing? (n.d.) Wilmar, Inc. wilmarinc.com