When in the market for a new car, your first response may be to consider buying. Even in most cases, buying a car is a significant financial commitment. A down payment locks up a considerable amount of available cash, and you’re forced to make instalments for months on end.
The car’s value depreciates immediately after you drive it off the lot, meaning you may owe more than the car is worth for years.
However, there is another possibility worth considering—leasing.
Leasing your next vehicle is an excellent choice. You may make a little or no down payment, and you might choose a shorter period than that of a vehicle loan. And the bank, not you, bears the risk of substantial future devaluation.
There are several benefits to leasing, and car leasing is becoming an increasingly popular form of financing a vehicle for many drivers.
The Process Is Simple
Consider comparison sites like Lease Loco and how uncomplicated it all is.
Any leasing company will provide you with the monthly rental amount, the brand and model of the vehicle, the kind of gasoline used, the initial rental amount, and the specified term duration. It is relatively easy.
Low Monthly Instalments
When you lease a car, you avoid the need to get a bank loan or to pay large lump amounts of money; instead, you pay a single manageable, set monthly fee.
Monthly costs often include road tax, breakdown protection, and vehicle warranties, making budgeting for the vehicle straightforward.
Because you are not paying the vehicle’s full value, your monthly payment will often be cheaper.
If you value driving a newer or higher-end vehicle, monthly lease payments will be more reasonable than a large down payment. Generally, when you lease a car, you get a brand-new car.
You Get A New Car Of Your Choosing
Driving the newest car is a luxury that many motorists cannot afford. However, leasing allows you to drive a brand-new car every few years and get regular improvements.
The technology in cars is constantly advancing faster than ever before. Every year, new safety features, increased fuel efficiency, and enhancements to in-vehicle entertainment systems are launched, which means your car might seem old-fashioned in only a few years.
Leasing allows you to drive the latest model every two to four years, along with your choice of optional features such as additional technology, driving aids, and paintwork.
Many PCP packages and similar loan arrangements need a 10%-20% down payment, which makes the first payment especially difficult on your budget. You may drive away in a brand-new car with a lease after making only one monthly lease payment.
This makes leasing ideal for a variety of situations. For instance, a lesser deposit is advantageous if you’ve just started a new job and have a consistent income but lack the funds to put down a new car.
When cash flow is constrained and free capital is scarce, the last thing you want to do is burden your business with bank loans and overdrafts for corporate vehicles.
Business car leasing eliminates the need to raise upfront funds to purchase company vehicles since you pay a set monthly fee – which is predictable and allows you to work within a budget.
The leased vehicle is collected and sold at the end of the contract time, saving you the headache of depreciation and sale administration.
Buying a new car will most likely be one of the most significant expenses of your life, so the ability to make reasonable, set payments is one of the top leasing perks.
All payments are agreed upon in advance with a lease, and there are no exceptions to the yearly mileage or equity requirements. Other types of financing, such as PCP, offer the promise of equity after your contract, which may or may not materialise.
Monthly fees will remain constant during the term of your contract, and this should significantly simplify budgeting since you’ll be able to control your outgoings from the start.
Tax Relief For Businesses
Not every business can afford a new car or fleet, and small and medium enterprises may have difficulty obtaining finance for a new vehicle.
However, if you are a business owner, you may be eligible for various tax advantages related to automotive leasing, ranging from mileage reimbursements to low-emission savings.
VAT applies to business car leasing. However, you will be able to collect 50% of the VAT on your monthly bills – provided you are VAT registered, of course.
You cannot claim 100% since the car is used privately in 99 per cent of situations. If your leasing vehicle is utilised only for business purposes – for example, if it is a pool vehicle with no private use – you may get 100% of the VAT returned.
In any case, it’s a VAT-efficient method of financing your business vehicles. If you have a maintenance contract in addition to your monthly business car lease, you may recover 100% of the VAT on that expense. There are no limitations.
Increased Cash Flow
Purchasing cars requires significant capital investment; with contract hire, you may reinvest the money in your company and improve your cash flow.
One of the benefits of business automobile leasing is that it provides an extra line of credit, allowing you to invest in your company and alleviate cash flow concerns.
As previously said, you may redirect your cash flow away from depreciating assets and toward company development.
Comprehensive Manufacturer Guarantee
A significant advantage of leasing is that you never have to concern yourself with technical troubles or maintenance.
If you lease a vehicle for less than 36 months, you will be protected by a bumper-to-bumper manufacturer warranty for the duration of the lease. This is critical for many individuals; they do not want to be concerned about maintenance or breakdowns.
The Bottom Line
While the conventional perception is that purchasing a vehicle is preferred, leasing a car makes more financial sense if you own a business. Leasing enables you to test drive a new car for a longer time. Individuals who lease cars have the privilege of driving numerous different vehicles as if they were their own, and if that sounds thrilling and entertaining, leasing is for you.