There is no doubt that most businesses would grind to a halt if they had no transport. Whether it is a posh car such as the one in the image or a delivery van for your products, I’m sure you rely on motors every day. Most companies face a dilemma; to lease their vehicles or to buy them. The debate rages on, as it has done for several decades now, and I would like to put forward my arguments. They might just sway you one way or the other if you need to replace your fleet soon. Whichever path you choose, it is likely to have a massive effect on your forthcoming financial year. You must include it in your strategy to maximise profits and minimise losses. Sometimes it can be hard to understand all of the implications; I hope this article will clear the matter up once and for all. I will address each advantage and disadvantage as I see it, to help you form an opinion of which way you should detect your business.
Purchase And Rental Costs
Of course, cost is the most significant issue to consider when stocking your motor pool. A fleet of new vehicles is likely to run into hundreds of thousands of pounds. Do you have that sort of money in the bank? Here is a couple of things to think about when buying the fleet.
- If your company made massive profits and you need to spend money in order to bring them down, vehicles are an ideal solution. When you buy them, they become an asset and therefore increase the value of said company. Though motors depreciate quickly, they are still a good investment.
- Renting a fleet of vehicles has no effect on the value of your business. Though the rental cost goes against the gross profits of your company, they don’t assist you when you need to spend a lot of money in one go.
As you can see, there are compelling financial reasons to buy the motors.
If you purchase vehicles, whether they are new models from a manufacturer’s dealer or used cars from GK Group, you will need to find the right type of auto insurance. As you can imagine, insuring a fleet for any drivers is likely to cost a fortune. That expense adds nothing to your venture, and the costs will go up if your staff have accidents. The insurance premium is often part of the package for vehicles on lease. That means you have no renewal fees to worry about at the end of the year and less paperwork to sort through. Insurance is a tricky and time-consuming subject that most business owners hate.
Vehicle maintenance is an expensive business. If you fail to undertake it properly, it can cost you a lot of money on the long run. Here are a few maintenance tasks that you will have to perform if you buy a fleet. Some companies find it best to hire a full-time mechanic to keep their vehicles on the move.
- Most engines need an oil change every year. If they cover a couple of thousand miles every month, the owner should change the oil twice a year. It doesn’t seem like much of a chore for one or two vans, but when you have twenty or thirty, the costs start to mount up.
- Tyres are a significant expense whether you buy or rent an automobile. You need to check the small print on the contract. Many rental companies will not include the cost of new tyres in the price.
- Exhaust pipes cost a lot of money for modern vehicles. The catalytic converter alone can cost hundreds. Though you should expect the system to last for five years at least on a new car, you will face a hefty bill eventually.
- You must replace the timing belt at the specified intervals for the engine. It is probably the most expensive part of the service schedule. It is a vital part of the engine that keeps all of the parts synchronized and a failure often proves catastrophic. They are often difficult to change and take at least an hour to do so. That means labour costs are high.
You will need to find out exactly what is and isn’t part of the rental fee. Usually, you do not have to worry about any aspect of servicing except for the tyres. That isn’t as good as it sounds because nothing comes for free; you pay for the service in the monthly cost of the vehicle.
Road tax is a significant motoring expense. The bigger the engine is, the more you will pay. This cost can cripple a business that needs many vehicles to function. This antiquated tax is part of the rental cost of the vehicle, so you don’t have to pay it all in advance. I think it is time that it was put onto the cost of fuel so that those who drive the most miles on the road pay the most.
If the vehicle breaks down and it belongs to you, your business could come to a standstill until you repair it. It will force you to hire another one until the repairs are complete, which could take several weeks. A rental company would replace it quickly to keep you on the move until they fix the problem. You will need to pay for breakdown cover for each car and van, but that is usually in with the monthly costs of a lease.
As you can see, there are advantages to renting and buying. The downside to a rented vehicle is that it never belongs to you and therefore does not become an asset to your company. Some people like it that way. They enjoy the fact that they do not have to pay out a fortune to begin with and that they can spread the cost over the financial year. I am own the transport and prefer to keep it that way. If my affairs take a turn for the worse, the vehicles belong to me, and I can continue to operate. If I cannot afford the rental payments, they will take the cars back, and my business will go to the wall. The conclusion? Buying is best!