Starting a fleet business is not a run of the mill venture. You need to have a thorough understanding of every aspect beforehand. You have to make many important decisions, from deciding the budget and scope to choosing fleet management software. Vehicle selection is another high priority aspect and requires careful consideration.
Whether to lease or buy vehicles? This question might be in your mind if you are planning to start a fleet business. The fact is that both options can work depending on the scope and needs of a company. Although it is hard to make a judgment, we will provide you the advantages and disadvantages of both in this blog.
Leasing is a different type of renting, but it is done for a longer time. The money paid for leasing is paid for its usage instead of its value. It is a popular option for smaller businesses or startups that do not have a lot of investment. Let us get into the advantages and disadvantages of leasing fleet in detail.
Every business dreams of saving expenses on its fleet operations. Leasing vehicles is one way to do it. Although the amount of leasing payments vary, it is still less than purchasing. Therefore, leasing helps companies preserve capital to be used for something else.
The Option of Replacement:
As the companies continuously need to replace vehicles due to changing requirements, leasing helps them do so. They do not have to find buyers in case of replacement, and the process can be completed much quicker.
Lesser Administration Issues:
The companies do not have to worry about a lot of documentation for leased vehicles. They do not require to keep various records like registration and tax documents. It saves a lot of administration tasks for the managers and puts less pressure on fleet management software.
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One of the big problems with leasing is its continuous payments that can go on for a long time. It deprives the company of a fixed amount of money every month that could be used on other high priority tasks.
By getting leased vehicles, the companies have to face a lot of restrictions. These can include maintenance constraints and mileage limitations. Due to this reason, leasing bounds companies in various ways. It can also hurt the fleet operations.
Purchasing vehicles for operations is a widespread practice around the world. There are two options while buying vehicles, used and new. Here we will discuss the pros and cons of purchasing new ones.
Ownership of Asset:
The most significant benefit of buying is that it offers ownership to the company. The assets increase by buying new vehicles that also increases the overall worth of the business. In addition to that, it helps in creating financial statements like balance sheets.
No matter how good the leased vehicles’ condition is, it cannot be as good as new ones. The new automobiles do not require much maintenance work and are fuel-efficient. It saves a lot of operational expenses for the company.
More Operational Freedom:
With personally owned vehicles, you do not have any restrictions on you. Therefore, you tend to get more operational freedom and use them anyway you want to. For example, there are no fixed mileage limits or maintenance constraints. You can even customize a vehicle according to your requirements.
Huge Upfront Cost:
One of the biggest disadvantages of buying a fleet is the upfront cost. Regardless of the leasing scheme, the buying expense always exceed it. The company has to allocate a considerable chunk of its capital for buying. It can also take a toll on other business operations.
Unlike leasing, buying puts the responsibility of the maintenance solely on the company. It costs a lot of money and requires a trained workforce to perform effective repair and service. The modern fleet management software help a lot in performing maintenance in an organized manner.
When you buy new vehicles, you have to conduct a lot of documentation to fulfill compliance requirements. From getting them registered to meet the legal needs, there is a lot to be done. In addition to that, you have to keep every record of the vehicle as it is your asset.
Choosing between leasing and buying can be a hard pick as both have their advantages and disadvantages. If you are confused about your fleet’s selection, the information mentioned above will help you make an informed decision.