7.5 Myths of Business Vehicle Leasing
Identifying the top myths of business vehicle leasing was easy. Reducing it to 7.5 was more difficult.
Addressing the myths is harder yet. There are numerous misconceptions about fleet leasing.
Education and information are the cure.
Please read on to dispel the wives’ tales of leasing for business and get the honest truth!
We drive too many miles and damage our vehicles too much to lease.
Open-ended leases are purpose-built for fleets and have no mileage or damage restrictions. Leases can be written for 2,000 – 100,000 miles annually.
This is by far the most common misconception of business leasing. Open-end leases are written for the anticipated use of the vehicle without limiting miles or imposing charges for damage.
Both open and closed-end fleet leases can be configured with high mileage where dealer/OEM leases cannot be configured for high miles or damage. The latter are consumer leases, not designed for fleets.
Fleet management companies specialize in business leasing and have more lease options. Leasing for fleets exists – no mileage limits, no damage charges, and no restrictive lease terms.
We keep our fleet vehicles for a long time.
Leasing Is A Financial Alternative With A Built-In Exit Strategy.
Leasing provides a long-term fleet management system that compels fleets to evaluate each vehicle regularly. Leasing provides lower payments and allows business to grow faster. In addition, fleet management companies receive larger rebates that reduces the cost of each vehicle vs. buying.
If your business buys the vehicles in the end, total cost is almost identical to buying, but the tax benefits and lower monthly payments are superior with fleet leasing.
Attorneys, CPA’s, CFO’s, and accounting firms recommend fleet management and leasing. Leasing is a perfect option to finance business vehicles even if you intend to operate your fleet vehicles for many years.
We pay cash for our vehicles.
Understanding Vehicle Leasing and Opportunity Cost.
Picture two companies, one with $1.4M cash and one with very little cash and they own 50 fleet vehicles outright. The best approach is to look at opportunity cost of capital. Businesses with cash have power to utilize cash for strategic projects, opportunities, and acquisitions. The fact that they choose to retain a war chest of cash is even better.
Accountants and business advisors would tell you to lease and maintain a lockbox of strategic capital, especially when interest rates are lower. When leasing is explained, the majority of companies choose leasing over purchasing. Leasing affords a smaller investment of capital, improved financial statement ratios, sales tax savings in most every state, and the number one reason — dramatically improved income tax benefits.
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