Car leasing in general is a fairly controversial topic in the automotive world. Some laud it as the perfect flexible arrangement to suit a fast-paced world. Others say that it’s a waste of money and a one-way ticket to not owning a car.
In this article, we will look at why more and more businesses are turning to short-term car leasing (also known as flexible car leasing, long-term car hire or car subscription).
What are short-term flexible car leases?
A typical car lease is one where you take possession of a car and pay monthly for a period of 2, 4 or 4 years depending on the specific arrangement you make.
A short-term flexible lease is one you take possession of the vehicle for less than 2 years. You could even take on a car lease for as short a time as 3 months if you wanted.
Benefit 1: Financial savings
When you’re in business, having large sums of money to pay upfront costs is a big inconvenience. Short-term leasing offers your business an affordable way to access company vehicles that you need without the daunting brick wall of upfront costs in your way. This is because leasing typically requires little to no downpayment in order to secure terms. It’s even more flexible than vehicle financing in this way and helps improve your cashflow.
Benefit 2: Less maintenance
This is a benefit of any kind of lease, short or long term. However, it is even more apparent with car subscriptions because you can be driving a brand-new car every 6 months! Many subscriptions and short-term leases are for brand new vehicles with the full balance of their manufacturer’s warranty. That being the case, you can rely on the fact that maintenance costs on the vehicles will be much lower than it would be if you were buying second-hand vehicles. It would also be cheaper than dealing with cars you’d bought new previously and are now aging to the point where they need more maintenance.
With a short-term flexible lease, by the time you would be due to do maintenance on the vehicles, you will most likely have already returned it to the leasing company or dealership.
Benefit 3: Smaller commitment – Lower risk
A shorter lease means a smaller commitment. When you take out car loans or full-term leases, you have to take on the risk of anywhere from 3-6 years depending on the exact arrangement you make. This isn’t the case with short-term leases. Even if something needs to change drastically, you will be able to return or replace your vehicle with ease. For example, some car subscription providers allow you to return or modify your hire every three months!
Benefit 4: Speed, flexibility & availability
If you were going to purchase company cars, the process of getting approval for finance is a lot more complex than when you are leasing. It will also require the company to have a good credit history. This can be a problem for new businesses (who have not got a credit history) or those who are looking to expand quickly.
For short-term leasing, the approval steps are very few, and simple to complete. As we touched on in the previous point, too, there is a great deal more flexibility in the short-term option than in the purchasing/long-term leasing option.
When you get a short-term lease, you can quickly set up vehicle leasing to suit particular periods of demand. If you need extra vehicles during a busy season of the year, you can get them under a short-term lease agreement and then return them when business returns to normal. If you’d purchased them, you’d have to work out what to do with surplus vehicles for the rest of the year.
Benefit 5: No need to deal with sales or disposal
Finally, another great benefit of leasing is that you never have to deal with the sale or disposal of the vehicle when you are done with it. You can simply return the vehicle to the leasing company; sign any closing paperwork (if any) and you’re done. You don’t have to go through the rigmarole of advertising, finding buyers, negotiating prices, signing over ownership, etc.
Benefit 6: The flexibility to change your vehicle with your business
Both the automotive industry and your own business changes rapidly. As your business develops and changes, so may your requirements from a vehicle. It could be that you plan to tow equipment and need a high-power vehicle. Or it could be that you want to save money on fuel bills. You may even have a van that you no longer need, and you would like a pickup truck.
Short-term leasing and van subscriptions can give you this flexibility and allow you to change your vehicle from as little as every 6 months.
This means you always have the perfect vehicle for your business, and you can take advantage of the latest in automotive technology.
Short-term leasing: A great way forward for a business
It’s not there’s absolutely no downside. For instance, it’s always the case that when you are leasing a car, you are spending money without gaining any equity in the car whatsoever unless you eventually decide to pay off the balance (if offered) and take the vehicle as your own. Despite this, the number and scale of the potential benefits seem to far outweigh any of these concerns. Owning a depreciating asset like a car is almost never cost effective and short-term leasing and car subscriptions are becoming the new way for businesses to save money and have better financial security.