Business Vehicle Leasing Explained
For many businesses, vehicle leasing is a great alternative to purchasing and owning a vehicle outright. This is due to no major upfront costs, ease of budgeting, outsourcing vehicle admin hassles and flexibility. And it’s not just for big business either - vehicle leasing can suit businesses of all sizes, including those with just one vehicle!
But what is it, how does it work, and who is it right for? We’re going to dive into the ins and outs of vehicle leasing so you can decide what’s right for your business.
What is vehicle leasing?
Let’s start from the very beginning. A vehicle lease is an agreement with a specialist finance company that allows a business to obtain the benefits of using a vehicle for a fixed period of time and an agreed number of kilometres, for a fixed monthly payment. While the leasing company owns and often manages the vehicle maintenance, servicing and registration, the business can use it for as long as they’ve agreed as if they were to own it.
The key to understanding vehicle leasing is to understand whether owning vehicles makes sense for businesses. There are a few questions to ask here. Are vehicles an asset actually worth owning? Or given that vehicles depreciate in value, cost more to maintain as they age, and will ultimately go out of date and be replaced, should businesses simply view vehicles as replaceable business tools and pay for them as they use them?
Leasing offers you a smart economic way to obtain the benefits of the vehicle you require today to help run your business without a large cash outlay. You pay as you go and the leasing company does all the hard work managing and maintaining the vehicle, making it hassle free for you. When your vehicle requires replacing, you upgrade to the latest model, which can be safer, more fuel efficient and meets your needs for the next few years.
How long can I lease a vehicle?
Leases vary in duration but typically leases last for 12 to 48 or even 60 months. What a lot of people don’t realise is that you can select any number of months between 12 and 60 months. So, if you wanted a 51-month lease term that would be fine. Generally, the longer the lease term, the lower the monthly lease payments.
What happens once the lease ends? Easy. Simply return the vehicle, extend the lease or upgrade to a newer model.
What kind of vehicles can be leased?
Any new vehicle make or model whether it be petrol, diesel, hybrid or a full battery electric vehicle. It is very common for utes and trucks up to 35 metric tonnes GVM (Gross Vehicle Mass) to be leased. It’s important to understand that it’s the choice of the customer as to what vehicle(s) they select. If you want help selecting the right vehicle, you’re in the right place. FleetPartners are experts at that and can work with you on a range of considerations from vehicle safety to lowering emissions.
Buying a vehicle
Buying a vehicle requires a large outlay of cash upfront, which means you end up paying for the entire cost of a vehicle before getting the business benefits. You might have to take out a loan for the full purchase price for a vehicle that will depreciate in value as it ages.
There are maintenance costs, Fringe Benefit Tax, and then the cost of paying someone to manage fuel expenses, servicing and even paying infringement notices. It all adds up.
Leasing a vehicle
You don’t need to own a vehicle to reap the rewards. When you lease a vehicle, you can outsource the vehicle admin, upgrade to a brand new vehicle every 3 or 4 years, and free up cash to invest in other parts of your business.
Now we’ve established what vehicle leasing is, let’s talk about why it's a great solution for your business.
It makes business sense
Many businesses may not realise that it makes economic sense to lease vehicles, instead of owning outright. Let’s break it down.
Running a business relies on cash flow so why not use someone else’s? Leasing allows you to free up cash for more productive use in other parts of your business rather than tying up that capital in vehicle ownership.
When you lease a vehicle through a company like FleetPartners, you don’t need to pay cash upfront or a deposit. Instead, you get the opportunity to keep your cash to invest in other parts of your business that will generate better returns. Leasing is all about the most productive use of your capital!
It cuts down costs
There are a lot of costs involved in owning and running a vehicle. Vehicles can be costly to maintain, your business can outgrow them, and over time, they depreciate in value and often maintenance costs are much higher for older vehicles.
With FleetPartners, you can bundle the annual servicing costs, maintenance and repairs, WOF, Road User Charges, and registration into your lease. This makes budgeting easier and saves you time and hassle. Plus, when vehicles become out of date, you simply upgrade - without the massive price tag. You can also get discounted fuel with a fuel card from FleetPartners that further reduces running costs.
It makes budgeting easier
Leasing provides the convenience of one monthly payment, including costs like registration, scheduled servicing, maintenance repairs and roadside assistance. This makes budgeting easy. It also locks in the monthly payment over the whole term of 3, 4 or 5 years and protects you from price inflation on services like maintenance, repairs and servicing.
Tax advantages and easy accounting
Depending on your business circumstances, lease payments could be 100% tax-deductible when treated as an expense. You could also get access to a leasing line of credit so you can be pre-approved to lease more vehicles easily as your business grows.
Outsource maintenance to save time, cost and worry
Owning vehicles doesn't just require a big monetary investment, but a big-time investment too. Organising vehicle fit-outs, dealing with an accident or breakdown, finding a repairer, paying tolls or infringement notices, managing vehicle-related FBT or reconciling fuel receipts - the list goes on. Engaging a company like FleetPartners allows you to outsource all aspects of managing your vehicles so you can spend more time running your business.
It can help you tread a little lighter on the planet
One of the easiest ways to reduce the CO2 emissions of your business is to lease an electric or hybrid vehicle. Electric vehicles are generally more expensive to purchase than their internal combustion engine equivalents. If you lease an EV, you are not restricted by the cost barrier or budget limitations. The new clean car rebate from the NZ government applies a discount to eligible EVs, so it makes it cheaper overall. FleetPartners will pass on the Clean Car Discount on eligible plug-in hybrid and electric vehicles, so you can get a lower monthly lease rate. For more information, click here.
A Fully Maintained Operating Lease
A Fully Maintained Operating Lease is most popular as it takes care of everything for you. You can consolidate most running and maintenance costs into one monthly payment. With flexible terms from 36 to 60 months, you get visibility over your costs and the FleetPartners team manage the day-to-day for you. This includes maintenance, servicing reminders, repairs, registration, roadside assistance, relief vehicle service and more.
A Managed Maintenance Operating Lease
This option comes with all the features of a Fully Maintained Operating Lease but the maintenance costs are recharged back to you in the month the work is incurred. With FleetPartners, you get access to preferential pricing through our supplier network for labour, parts, and tyres, which can typically give you up to 15-20% discount off RRP.
What if I have a short-term requirement?
With FleetPartners, you can lease a quality ex-lease vehicle with EzyDrive on a Fully Maintained Operating Lease. It’s a shorter term solution for businesses who may want to trial leasing, or only need a vehicle for 12 or 24 months. FleetPartners offer New Zealand new, well-serviced vehicles complete with a 100-point mechanical check, and you can choose a term from 12 to 45 months.
Important Information: information is current as at 24-02-2022 and subject to change.
Leasing 101 Guide
For many businesses, vehicle leasing is a great alternative to purchasing and owning a vehicle outright.
Read our latest blog to find out how leasing could help your business.