Do you buy or lease? You need to review your options carefully: is leasing better than buying before making your final decision.
Leasing instead of buying has many advantages over traditional hire purchase agreements.
Should a business buy or lease a vehicle?
If you are wondering which option makes more sense, then let’s take an example of a car with a £30,000 price tag, purchased or leased over a standard three-year term.
Assume that both interest rates for buying and leasing are the same, at 6% and that you will be driving the industry standard of 10,000 miles per year.
The primary benefit of leasing over buying your next vehicle is the monthly expenses. A buyer will have a monthly payment of £700, while lease will be £560.
This is a massive difference in monthly payments and the lease wins hands down, saving £140 a month. That is almost a quarter the cost of the monthly payments on the car.
The reason for the huge difference between the payments is the fact that with a lease you are only paying off the depreciation of the vehicle, not the total vehicle cost.
Lease agreements generally have more favourable terms for down payments than buying outright. Leasing a car requires only a down payment of usually three monthly rentals in advance – sometimes less – which is why this option has become so popular.
An important factor when thinking of a lease is the amount of miles you cover annually. Lease agreements will generally tie you into a certain mileage, such as 10,000 miles per year.
If you drive more than that then you will be liable for a penalty fee for each mile you drive over the set allowance.
The penalty is not massive, at around 10 to 15p per mile, however, you should try to keep within the range if you can.
While this may sound like a negative for a lease, you should take into account that if you buy a car you will be penalised when trading in if the mileage is too high.
Wear and tear fees are also written into every lease agreement and you will be penalised for any dings, dents, and scratches. These fees can equate to up to three months lease payments
Free2Move Lease, part of PSA, is a leading provider of contract hire and leasing products and services, including those designed specifically for small and medium size UK businesses.
With its leasing packages the company provides a number of inclusive features with its standard leases plus a range of optional services designed to enable customers to focus on running their business rather than running their vehicles, making them particularly attractive for SMEs.
This means that in addition to the contract hire and finance leasing packages that customers would expect, Free2Move Lease provides a range of support services to help customers manage their fleet cost effectively and safely.
Customers who sign a Free2Move Lease contract with 18 months duration or longer, gain a range of standard benefits.
These are particularly attractive for smaller businesses, especially where it’s unlikely there is a dedicated fleet manager role.
These benefits include the Free2Move Lease Automatic Reminders for Servicing, Mileage and the availability of the Driver Helpline.
This service provides free reminders for servicing and MoT, mileage monitoring (to help avoid excess mileage charges at end of contract, which helps to foster loyalty) and a service booking line.
Enhanced benefits are also included as standard, for the duration of contracts: VED, UK and European accident and breakdown assistance cover for all contract hire rentals.
Most new vehicles in the Free2Move Lease fleet are equipped with connected box technology, enabling remote mileage monitoring, while other vehicles can also be fitted with the technology.
The Free2Move Lease Servicing and Driver Helpline team can send email notifications relating to servicing and maintenance requirements to help ensure that the vehicle’s service schedule is followed correctly.
Customers can email or phone the Servicing and Driver Helpline, which would then make service bookings with the customer’s chosen dealership and monitor the work to completion.
If predetermined levels of excess mileage are approached, the Helpline team will send periodic reminders to help minimise any end of term charges.
The service could be particularly useful for high-mileage drivers or those with a busy work schedule, who have relatively little time to plan vehicle maintenance.
The benefits for an SME include helping to avoid potential “over mileage” contract charges and “missing service” charges.
The Free2Move Lease Servicing and Driver Helpline also provides a specialist support team, while the system can help to reduce vehicle downtime during servicing.
In the UK and Europe, Free2Move Lease contracts include Accident and Breakdown Cover ensures that if the vehicle is not driveable, it would be recovered and taken to the nearest authorised accident repair centre.
Other benefits include a discounted fuel card programme, with on-line 24-hour account management and custom reporting for up to 48 months.
In addition, there is a dedicated Key Account Manager and an End of Contract Portal to book vehicle returns.
A range of services are also available from the supplying dealer. Customers can upgrade to an enhanced level of service, which provides additional support, by managing service and MoT bookings on the customer’s behalf, making the bookings and following them through to completion, ensuring that they happen and reporting to the chosen contact on a regular basis.
The enhanced service helps to relieve busy customers from managing servicing and maintenance, helping them to focus on providing service to their own customers.
Free2Move Lease has also developed the “MyLease” driver portal, providing a secure communications channel for the company and its customers and a place where customers can find relevant documentation related to their contract and vehicle.
MyLease is a password protected portal which provides a secure location for a range of information from contract details, a record of payments and a section dealing with frequently asked questions (FAQs).
It has been developed to reflect the needs of a wide cross-section of customers. Currently, MyLease offers a range of semi-automated forms for customers to complete, covering areas such as changes of address, finance enquiries and change of payment date.
This part of the portal is currently undergoing further development and some forms are due to become fully automated in the coming months.
Customers are able to view invoices that they have been sent and can find invoices dating back over the past 12 months securely stored on the portal. Messages can be sent and received without using email, offering customers better security. Other services offered by MyLease include information relating to the customer’s vehicles and a section where secure online payments can be made.
One of the advantages that MyLease offers is that the system is reactive. It can be expanded to suit perceived customer requirements. If customers suggest features that would be useful, the portal has the built-in flexibility to add the features to the system quickly and easily.
The system is under constant review with several developments currently under way. For instance, a “live chat” facility is currently being developed, which will give customers the facility to take up and resolve questions “live” on-line with a member of the Free2Move Lease team.