7 Things You Need to Know About Business Car Leasing
Acquiring a car for business purposes through methods such as a novated lease has boomed in popularity as of late. Millennial car buyers, in particular, are using a finance company to lease more in recent years to afford an appropriate car at a much lower cost – and with good reason too.
Business car leasing gives drivers a big advantage – access to a reliable car and a finance lease solution that suits their needs without blowing the budget or dealing with the hassle of ownership. It’s a package that provides all the benefits for both the employer and employee, from initial capital investment through to ongoing running costs.
Unlike purchasing a car outright through a bank loan or other lender purchases, you don’t need to put down a deposit, which frees up extra cash for other essential expenses when novated leasing. The flexible contract terms allow you to make changes to the lease by extending the term once it is nearing its end.
Are you thinking of leasing a car for business purposes or updating your current fleet? Here are some key points to consider before deciding if you and your business can make a car lease work for you:
1. Keep a Log Book During Your Car Lease
Tracking personal usage vs business usage of your leased vehicle is important, so you will be required to keep a log book for the car for the first few months. This will ensure the vehicle is being used predominantly for business purposes.
If the car is a tool of trade or work ute with a carrying capacity of over 1 tonne, there is no need to keep a log book if personal use is incidental.
2. Assets and Liability Form Part of Your Car Lease Balance Sheet
When entering car leases through a business, the value of the asset is capitalised to the balance sheet and the liability for future lease repayments is also raised to the balance sheet as a liability. For the business, this creates a secured liability on the balance sheet.
There is no impact for the employee and this is restricted to pure tool of trade vehicles. To remove this from the balance sheet, employers could use an operating lease, which then becomes a rental over the term of the lease.
3. Take Time to Decide on the Right Car Lease
Choosing the right type of car under a business lease is important. It needs to fit with both your business and personal needs and act as a reliable asset. The usage of the car is a vital criterion too. Fleet managers can assist in the process by managing the vehicle’s specs and recommending makes and models that will suit your needs and the environment.
Enabling a fleet manager to choose the car with you also means you can get assistance with ensuring it meets with the engineering compliances of your business or industry.
4. Maintain Your Leased Car Asset
Cars aren’t cheap to purchase – especially when it’s a desired make and model required for business. Even when financing a car loan, maintenance and service costs are quick to add up and it can be easy to lose track of these finances.
Utilising the services of a fleet manager will help to reduce the costs of running the car and extend its lifespan. This is because required servicing will be scheduled and maintenance thoroughly managed to stay on top of everything.
To maximise the usage and make the most of the capital asset, it’s worthwhile having the car tracked too. This would be an additional cost but utilises telematics (long distance transmission) to ensure the car is on site and being used as intended. Having tracking on the car will also help to keep maintenance and running costs to a minimum.
5. Use a Fleet Manager to Reduce Car Lease Costs
If you’re looking to refresh your current fleet of business cars, or you’re needing to purchase multiple cars to lease, it’s imperative to use a fleet manager to reduce the costs of buying each car. Generally, the motor trade will negotiate when multiple vehicles are being bought at once. In these situations, a fleet manager has aggregation capability to get the most bang for your buck.
Using a fleet manager doesn’t just implement smarter vehicle selection and maintenance tracking, but also helps to reduce fuel consumption and implement better driving habits too.
At Easi, we make leasing cars for business purposes easy by reducing as many of the costs associated with buying a new car. We aim to choose vehicles based on whole-life costs and encourage fuel efficient driving for all staff.
Accident management, fleet tips, smartly chosen fuel card providers and reduced fleet journeys are all key areas we can help with to reduce long-term expenses.
6. Learn Residual Value vs. Resale Values
Look at the residual value of the car at its end of life and determine how that relates to resale values. So you’re not left out of pocket, you want to match the resale value to any debt owing at the end of the lease term.
The residual value, also known as the balloon payment, is the amount a business expects to sell an asset for at the end of its useful life. In this case, the asset is the car. The value outlines the function of the amount and rate of depreciation on the car and can be affected by monthly payments.
Almost all vehicles’ residual value will depreciate over time, but some much less than others. In many cases, the higher the residual value, the more the car is worth. This can make it easier to sell or trade in at the end of the lease.
7. Keep an Eye on the Mileage of Your Leased Car
Every business car lease has a number of miles that the user is allowed to travel each year. This allowance is agreed upon in advance, usually about 10,000 miles (16,000+ kilometres).
Any mileage used over the agreed amount in the car lease is charged at an excess mileage rate. If you believe more will be used, it’s worth it to pay extra for additional mileage or you’ll be stuck with this cost at the end of the lease.
This surcharge of extra mileage varies from car to car so check with your fleet manager for specific models. To avoid any issues, it’s best to average out to your selected miles per year.
Choose Easi For Your Business Car Leasing Needs
With 20 years of experience in the industry of car leasing, we have the knowledge to deliver effective business car solutions every time. We are able to deliver an extensive range of vehicle lease options under flexible contract terms ranging from utes, to large SUVs, to hatchbacks.
To find out more about how Easi can assist with your business car leasing, contact one of our staff today.