Almost a year into its run, the consequences of the COVID-19 pandemic are starting to rear all over our lives and businesses. As remote work grows, many companies are re-examining their need for leased company vehicles.
However, this doesn’t necessarily mean that the leased company car is becoming a thing of the past. Quite the contrary, in fact: Predictions say that the vehicle leasing market in Europe will recover and grow by £42.9 billion between 2020 and 2024. The same goes for the rest of the world as well.
Here is why leasing a car for business is still a wise decision in 2021.
If you use your car for business purposes, a lease will often afford you more tax write-offs than a loan. That’s because the IRS allows you to deduct both the depreciation and the financing costs that are part of each monthly payment.
When you lease a vehicle, you don’t pay sales tax on the full value of a leased vehicle but, instead, you are only taxed on the portion of the value you use during the leasing period.
Another benefit comes from the fact that the tax payable is spread all along the leasing period and is paid together with monthly installments. (Keep in mind that if you’re leasing a luxury automobile, the amount you can write off may be limited).
Better public image
With car leases, you can remain competitive over the long term because as the car gets outdated, you can simply choose a newer model. This looks good for your business image. Besides, you can often upgrade to a newer vehicle if the need arises for a more current and more updated vehicle.
Leasing allows you to select your new vehicle from a various selection of the latest makes and models and best deals. You benefit from the reliability, durability, and exceptional fuel economy of driving a new car with all the best tech and innovations. This lowers your costs and makes your vehicle less exposed to maintenance and performance issues that appear as the car ages.
No troubles with selling a used car
When your lease is over, you simply return the car to the leasing company. No more hassles trying to sell a used car – and the value of the vehicle at the end of the lease is not your problem. The only thing you have to worry about is paying any end-of-lease fees, including those for abnormal wear or additional mileage on the vehicle.
When the lease expires, the car goes back to the leasing company, and you’re free to pick a better, more updated vehicle. In some cases, you can decide to buy the car at the end of the lease for a fair market price, but you can also leave it as it is.
Many new cars offer a warranty that lasts at least three years. So when you take out a three-year lease, most of the repairs should be covered. Leasing arrangements largely eliminate the hazards of significant unforeseen expenses.
Besides, leasing lets you choose a contract that covers all your car’s maintenance and service, so the annual check-up, tire replacements, repairs, and roadside assistance are included in the package. Leasing keeps your company moving, taking away all the hassle and administration tasks related to your car.
Many companies also offer a fully maintained operating lease meaning anything that goes wrong with the vehicle remains the company’s responsibility, saving you on business costs.
Free up capital
Buying cars is capital intensive – with contract hire, you can invest in the business and get better cash flow.
One of the best things about business car leasing is that it’s an additional line of credit, meaning you can free up money to invest in your business and ease any cash flow worries. With a lease, you can stop using your cash on a depreciating asset and redirect it to fund your business’s expansion.
Leasing frees up the money that would’ve been spent on buying the car to be used on other vital areas of the business to help it grow during the pandemic.
Better value for your money
The payments on a lease will typically cost less than what you pay for a car loan. You can save some extra cash this way to raise it for more important things. Leasing means you get a new, reliable vehicle, for a set period, at a fixed monthly fee.
In other words, you don’t need to find or use capital to fund your company car. What’s more, leasing a car is generally cheaper than buying one. Think of the services, residual value, interest, taxes, and insurance that is included in your lease – you get value for money.
If you can’t afford to buy a business vehicle outright, you may be tempted to look for a second-hand car as an alternative. In terms of cost, this can have advantages depending on how much you can afford, but you may not provide a vehicle to staff members that include the latest safety features.
A new car is more likely to have extra safety features than an older vehicle, plus all lease cars come with a manufacturer’s warranty, too, for additional peace of mind.
There is no doubt that the shift to remote work and video conferencing makes some company vehicles disappear.
While some business areas are indeed suffering from the pandemic and its consequences – most notably, account management and sales – there is no denying that leasing a company car is still a valid option.
With improved safety and lower maintenance costs paired up with tax benefits and freed capital, choosing to lease over purchasing a car for your business is the financially responsible thing to do.
When you sign a lease agreement, you can easily replace that car with a newer, safer, and more eco-friendly model. This improves your company’s branding and public image while bringing down your expenses and raising your employees’ satisfaction.