Vehicle lease contracts are becoming increasingly popular with everyday buyers, and while it was common for many businesses to lease vehicles before, we are seeing a clear trend towards even more businesses going for this option. There are many factors fuelling this growth, including tax incentives and the growing influence of start-ups on the market. Let’s take a look at some of the numbers behind this trend and reasons why car leases seem so attractive to new businesses.
It has been estimated that about 300,000 vehicles in total were leased to businesses in 2017. Another surprising statistic was the number of diesel vehicles that are leased not only by businesses but by regular customers as well.
According to Vantage Leasing, 76% of the vehicles they leased in 2018 were diesel. As a matter of fact, they offer multiple Range rover leasing deals on petrol, diesel and hybrid models, but diesel remains the top category. Only 7% of the vehicles they leased were either hybrid or electric.
The Factors Behind This Trend
Leasing vehicles is always a great option for businesses who are trying to balance their books and forecast expenses. Leasing is also seen as a great option for startup owners as well. As many of these budding businesses are cash poor, leasing allows them to limit monthly expenses and put that money to better use. Then there’s the benefit of having a new or almost new vehicle that will remain under warranty during the duration of the lease for a fraction of the cost.
The Tax Benefits
Another thing that pushes many businesses to lease instead of buying are the tax benefits. For instance, car leases are not viewed as assets and can be filed as a business expense. In addition, 100% of the value-added tax can be redeemed if the vehicle is used solely for business. And if you also want to use the vehicle for personal reasons, 50% of the VAT is redeemable.
A Few Cautionary Words for Business Owners
While leasing a vehicle can be a great way to free up some cash that can be reinvested, it’s also important that business owners choose the right terms and contract types.
A Business Contract Hire is what most people think about when they talk about leases. This where they pay fixed monthly payments covering depreciation on the vehicle until the end of the term. However, some may think that a Business Contract Purchase that leaves them the option to buy the vehicle at the end of the lease could be a better choice. This also allows you to avoid having to pay additional charges for damage or extra mileage on the vehicle. It all depends on what your immediate needs are and if you could actually benefit from owning the vehicle versus going for another lease.
Leasing is definitely growing in popularity among financially conscious businesses and customers alike. This in return could have tangible repercussions on new car sales, and the motor industry as a whole.