Determining whether to own or lease your company vehicles can be a tough decision, as there are a lot of key factors to look over before you make your purchase. Fleet managers must look at the financial benefits of owning or leasing their fleet vehicles by looking at the value of the net after tax cash flow of both options.
Determining whether to own or lease your company vehicles can be a tough decision, as there are a lot of key factors to look over before you make your purchase. Fleet managers must look at the financial benefits of owning or leasing their fleet vehicles by looking at the value of the net after tax cash flow of both options.
What are the benefits of owning or leasing the company’s vehicles?
For a company to own their vehicles, the fleet manager must make sure that the opportunity cost is lower than the cost of leasing the vehicles. It is also beneficial to own the company vehicles because it provides more flexibility with repairs and when to replace and sell the vehicles.
In comparison, leasing the vehicles has been the more prevalent option for companies with a larger fleet size. Leasing a vehicle means that cost can get written off in the monthly expenses, which keeps the company’s lines of credit open for other purchases. Just as well, with leasing the vehicles you won’t have a large purchase of the vehicles upfront which can hurt your cash flow.
So, while there are benefits to both leasing and owning the company’s fleet vehicles, the fleet manager must review the opportunity cost of both options. There must be sufficient cash to purchase the entire fleet, or leasing can be the more fiscal option. There are financing options for purchasing vehicles, and there are different types of leases and contracts. In the end, it just depends on the company’s finances and profitability in determining owning or leasing their fleet vehicles.
