The decision of whether to lease or buy comes down to specific company needs and their financial positions. Included are a number of important facts about car leasing every business owner should be aware of.
Leasing a Company Car Saves Money
Maintaining as little cash as possible for a company while still meeting needs of functions is an ideal cash flow position. Too much free cash and it could be invested somewhere else; too little cash and the business is unable to perform properly.
Leasing is ideal for cash flow optimization because payments are submitted monthly on a planned-out schedule. If a company owns their own vehicle and needs to repair or modify it, separate transactions funded by the company must be exacted.
Lease payments are also cheaper than installments on monthly financing agreements. The total amount of lease agreement payments are nearly always lower than purchased vehicles, as well. Expensive down payments must be included on financing deals, unlike the small security deposits that leases sometimes call for.
Leasing Saves Time and Money Toward Payment of Repairs and Other Fixes
Most vehicles are equipped with advanced technological tools that are often difficult to understand, repair, and alter. To modify the function of this technology, workers must be trained to fix the company car’s computer and things related to it. Such knowledge is generally not easy to run across, and involves paying third party teachers to educate your workers. When a vehicle is leased, it is not the employees’ responsibility to modify or otherwise make different things on that car. Such fixes are entirely the responsibility of the dealership, saving your company tons of money and time.
If your leased company car is damaged and needs repair, its dealership will administer proper repairs and return it to working condition. Workers at your company can carry out their jobs, rather than spending labor hours on fixing something they aren’t familiar with. The fact that dealerships spend all time and money necessary to fix vehicles is advantageous to those who lease company cars.
Operating Leases Without Options to Buy Save Your Company Tax Money
When a car is purchased for business use, its value is depreciated over a number of years on your company’s tax returns and books. This takes several years to complete and is not advantageous if your company needs tax help in the current year.
Accepting an operating lease, which means it does not include a dollar amount offer to purchase at lease end, can provide significant tax benefits to your company. The entire value of the operating lease can be taken as an expense to reduce income in the current period. The tax advantage provided by an operating lease
Company car leases are much better than purchases of cars for many reasons, but the benefit provided by the operating lease is icing on the company’s proverbial cake.
Company Leases Facilitate Customized Lease Terms
Although consumer car leases are rarely customizable, lessors of company equipment nearly always customize leases for contracts with high value. Payments can be deferred over long periods of time, can be paid more in certain months than others, can provide unique terms to benefit various niches, and any other way imaginable.
Companies who purchase a car used for business pay the purchase price in one lump. Those who finance the purchase of company vehicles must pay regular amounts each month on fixed, unfriendly schedules.
Companies who lease cars with business-friendly lessors can benefit in cash flow, taxes, and other functions from any combination of customized terms you choose. Car leasing’s nuances and intricacies make it more valuable than purchasing a car.