Businesses are always confused whether they should own a brand new car or go for a leased one. If you’re one of them, this post is worth a read.
Since buying a car is one of the biggest investments you make, it’s good to take a look at all your options. Both leasing and buying have positive and negative aspects, just like renting versus buying a house. However, as a business owner, leasing vehicles sound more familiar.
Let me prove it.
When you purchase a car, you’re bound to pay the high cost of ownership and management of your vehicle, with a depreciating asset that calls for costs in funding, administration, and risk on disposal and impacts on your return on investment/assets.
On the other hand, when you choose to get a car from a reputable vehicle leasing company, you can eliminate the costs of ownership and be able to focus on your core business.
This is just a chunk, to know about all the benefits, read this blog post.
Benefits of leasing a car for your business
Many car leasing companies offer customized vehicle fleet solutions in India. Making a deal with a good company enables you to sell your leased fleet to it (that you leased from the same company). In lieu, you’ll get immediate capital for use in your business, thereby not impacting on current funding lines as it is off- balance sheet.
Moreover, the leasing company can provide you with immediate management of the fleet, consolidation of fleet running costs into a single monthly payment, cost control and reduce risk on disposal.
Let’s find out how vehicle fleet solutions help your business.
No Down Payment
As a business person, you’re not required to make any down payment for procuring the car through a leasing policy. In case of a loan, 10%-15% contribution may require, depending on the company you have chosen.
As an entrepreneur, you need not capitalize the asset in your books. Instead, you can opt for making this option more appropriate as a corporate. Experts say that capitalization hardly contributes to budgeting and keeping your leverage ratio low.
Higher parts of savings by leasing vehicles for your business come from the ‘tax saving.’ Frankly speaking, when you lease a car, you can save tax on the lease rental, paid for the vehicle taken on lease. Actually, all rental both principal and interest amount are exempted whereas, in case of a loan, only interest portion gets expensed off.
Road tax and insurance are through monthly Rental Spread, not ‘cash outflow’ at one go. This will help you give a boost to the liquidity; making it possible for you to cater to your other essential expenses.
With the car leasing solution, you don’t need to arrange addition resources to maintain the leased vehicle. It’s because the leasing company takes care of the maintenance of the car. So, you can outsource it to the service provider.
If you’re still confused, write in the comment. We’ll help you in a more precise manner.