Should your business own or lease a car fleet?
Today, car leasing is a fast-growing global phenomenon. And businesses, big and small, are in the driver's seat. Leasing brings a host of benefits that enterprises can leverage, to optimise their operations and finances, and bring their employees safer, more rewarding mobility options.
But how does leasing fare, compared to buying - the traditional way of procuring cars for your company's mobility needs? Does leasing provide significant advantages? Is it risky to not own the vehicle your employees would be driving? What's in it for your business? Let's find out.
The first step is to understand the needs of your enterprise. Are your operations commute-intensive? Are there any specific transport needs, such as heavy goods or sensitive machinery, that require a certain type of vehicle? How many employees need a vehicle for their daily commute, to and from your offices? Do most of your employees rely on public transport?
Then, you need to look at the resources you can allocate for the procurement and maintenance of your vehicle fleet. Both, in terms of time and cost.
Small and medium businesses (SMEs) have their own mobility needs. It is a common misconception that only big corporates can take the leasing route. Today, leasing is just as accessible and efficient for SMEs with a requirement of smaller, affordable mobility options.
Once you have these basic considerations in place, you can compare the two routes - car leasing and buying, to decide what's best for your business.
As trusted mobility partners, we've outlined some factors that will help you make an informed decision, when it comes to your company car fleet:
Cost efficiency: The cost incurred when you choose to buy the vehicles is immediate and is a capital expenditure. These funds can be put to use elsewhere, for more productive activities. Whereas with leasing, there is no upfront cost, but only fixed monthly payments based on your usage. These are variable, or operating expenses that reflect a healthier bottom line.
Remember, cars are depreciating assets. While buying leaves you bearing the brunt of depreciation, you don't have to worry about it when you lease. This is because your lease amount is pre-decided and is calculated after removing the value of depreciation from the cost of the car. Overall, it's important to be mindful of the Total Cost of Ownership (TCO) of your fleet, including maintenance, repairs and running costs, as we will see ahead.
Leasing brings your business and employees significant tax benefits. When your employees lease a car via your company, with a car leasing partner such as ALD Automotive, their monthly lease rentals are reduced from their pre-tax salary. This makes way for tax savings of up to 30%, depending on the vehicle’s usage.
Safety: When it comes to the safety of your employees and field staff, you want to ensure you have control over the safety standards of the cars they drive. While buying a vehicle lets you pick a safe car once, leasing enables timely upkeep and upgrades, that help you stay on top of car safety, throughout.
Since public transport is still fraught with risk, personal cars for employees are a safer, more reliable mobility option that keeps worries at bay while driving productivity for the enterprise.
Time-bound decision: If the business needs a vehicle for the long-term, then buying might seem like the more logical option. Over time, however, the maintenance costs increase, to keep the vehicle in running order.
With leasing, you get to drive the vehicle in its prime, and your business will not be stuck with a depreciating asset, or higher maintenance costs, as the vehicle ages. Leasing is time-bound and at the end of the lease tenure, the ageing vehicle may simply be returned to the leasing company.
Keeping up with technology: Today, it's crucial that businesses ensure their vehicle fleets are future ready. With the push for EV strengthening by the day, it might be relevant to factor the EV component into your mobility plans. EVs bring two attractive benefits for businesses - lower running costs and a positive push towards the company's sustainability goals.
Unfortunately, EVs come with a high upfront cost. So, if you set out to buy an EV, it's going to cost you a significant amount. Leasing, however, helps you mitigate this, as there is no down payment involved. So you can drive the best EVs in India, with easy monthly rentals.
By enabling easy upgrades, leasing also helps you stay up to date with the latest technology on the roads. By leveraging data from the latest sensor-based technology, in-car connectivity features and many more touchpoints, you can optimise your car fleet.
Flexibility: Flexibility is at the heart of any thriving business. Car leasing brings you this much-needed flexibility, by allowing easier, timely upgrades. When your company buys a car, the hassles of resale or disposal rest on your shoulders and come with significant time and resource costs.
With leasing, you can easily upgrade to a better car after your contract expires, or simply extend your lease. This flexibility is especially valuable for service-led industries, like hospitality, where leasing lets you induct fresh, modern vehicles easily, ensuring your brand and service standards remain high. For organisations that enable car leasing for employees, offerings like ALD Ugo give employees additional flexibility when it comes to their personal mobility as well.
When do businesses consider buying? While leasing seems to be the better choice for the most part, some businesses choose to buy their vehicles. If your usage is erratic, you may face some anxieties regarding charges on excess mileage travelled. In this case, buying the car gives you the freedom of driving without any additional charges or mileage limits.
Many businesses have specific needs when it comes to transportation, particularly when it comes to moving specialised machinery and equipment. So, if your car is going to need extensive modifications to accommodate these needs, you might want to consider buying. While leasing does allow certain modifications to suit your style, there may be certain restrictions that come with it. Also, you may not be allowed to take off the modifications made, while surrendering the car. When you buy, you have lesser responsibilities when it comes to how your employees drive the car. Whereas when you lease, reckless driving could lead to damages beyond acceptable wear and tear, and you could be liable to pay additional charges.
Maintenance, insurance and add-on services : The best lease contracts include provisions for add-on services such as maintenance, insurance, stand-by car, 24x7 roadside assistance, etc. These help you stay on top of vehicle upkeep and enable smoother operation of your fleet.
Right from selecting the right insurance cover, end-to-end claim coordination and settlement, to timely maintenance and repairs, the right leasing partner can significantly reduce your fleet's downtime and the hassles and costs you incur. What's more, the cost for these services come to you as a part of your monthly lease rental itself!
On the flip side, buying a car means you're on your own when it comes to arranging the right maintenance, insurance and repairs. This can be a costly affair and utilises time and resources.
In a nutshell, leasing makes sense for businesses looking at minimizing the burden of vehicle maintenance and ownership. It opens avenues for efficient fleet management, tracking and optimisation. As the leading car leasing and fleet management company in India, our products and services help you drive your business to new heights.
For assistance with procuring best-in-class leased cars for corporates fill out our contact form.