Whether it’s a fortune 500 company or a small business, at some point, every business requires a business vehicle. Using your personal vehicle for business purposes is not a wise choice, and that is why you must consider adding a business vehicle to your business.
Be it a small-scale pharmacy or a clothing company, a business car is a necessity. The big question is whether to lease or buy a car for your small business. It is sometimes a tough question; its answer lies in several factors of consideration. Each of these payment methods offers a unique set of features that are appropriate for different businesses.
Understanding Car Lease
A car lease is a contract between a lessor and the driver. It is the process where a lessor conveys the use of a car to the buyer for a specified period in exchange for money. In case of leasing a car, you do not get the ownership of the vehicle. At the end of the contract, you are required to return the vehicle to the lessor.
Difference Between Leasing and Buying a Car
In a lease, you do not get the ownership of the vehicle, but when you purchase, the vehicle is yours. There are some key differences between the two methods of payment besides ownership. These differences will help you understand what’s best for your business.
Length of Ownership
When you purchase a car, you can keep it with you until its wheels fall off or even sell it the very next day of purchase. However, when you lease a car, you have to keep the car for a period outlined in the contract. Returning the car before or after the contract time will result in penalties.
When leasing a car for your small business you have to pay 30% lower monthly payments than purchasing a car. If you are looking for lower monthly payments, leasing is a smart option.
Both the payment methods involve upfront costs. When purchasing a car, you must pay at least 10% of the car’s value for the best financing rates. Car leasing requires you to pay lower upfront costs and, in some cases, no upfront costs at all.
Vehicle Return or Resale
When you purchase a vehicle, what you do with it is your choice. You can sell it in the future or pass it to your family members. Sometimes, it becomes difficult to get rid of the car due to considerable depreciation. When you lease a car, things are plain and simple. You take the car back to the dealership at the end of the contract.
A car lease contract includes the mileage limit. At the time of return, if the mileage is above or below the number agreed upon in the contract, you will be charged with a fee.
The Final Choice
The final decision is entirely up to you. You need to make your choice according to your preferences, based on the differences. Every business has a unique set of requirements. For some, a business car lease is the smartest option, while some businesses prefer purchasing a vehicle. However, a rule of thumb is to buy appreciating assets, lease depreciating assets. The choice is yours!