If you're a business owner in the UK, you're likely trying to find ways to streamline your operations, and if your company relies on transporting people or goods, fleet leasing is a viable way to keep operations cost-effective and efficient.
However, if you're new to fleet leasing, you might be unsure how the whole process works.
No need to worry! In this blog, we'll delve into the ins and outs of fleet leasing, such as the benefits, the tax implications for your business, and how to manage a fleet.
We discuss:
Fleet leasing is when a business leases a group of vehicles to help with the day-to-day running of the company. The vehicles can vary depending on the needs of the business, such as company cars for salespeople, trucks for a trade business, or delivery vans for a B2C company.
The number of vehicles you lease can vary depending on your business needs. Small businesses looking for a fleet might only need five vehicles, whereas larger businesses might need up to 50 vehicles.
Fleet leasing is perfect for businesses looking to streamline operations, reduce overheads, and drive new vehicles every few years.
On the other hand is fleet ownership. Here, your business purchases the vehicles outright (either with cash or on finance) and you have complete control over the vehicles, including customisation and maintenance.
However, you will have to shoulder the responsibilities of fleet maintenance and eventual resale or disposal of the vehicles.
For a brief overview of business leasing, check out our video below:
When considering fleet leasing, there’s three different contract choices: Contract Hire, Finance Lease, or Outright Purchase.
- Contract Hire - Contract hire is the most common form of fleet leasing and is perfect for those who run a smaller fleet. Instead of ‘buying’ the vehicle, you pay an initial deposit and fixed monthly rentals to use someone else’s vehicles (the finance providers). At the end of the contract, you simply return the vehicle to the finance provider.
- Finance Lease - Finance lease is only available on commercial vehicles, and like contract hire, you never actually own the vehicles. However, you do own the value of the vehicle. Finance lease allows you to pay the cost over the lease period, but at the end of the contract, you have a final payment to pay, known as a balloon payment.
- Outright Purchase - Outright purchase is perfect for businesses that want to own their vehicles but want to avoid the risk of depreciation. Like always, you pay an initial deposit and fixed monthly installments for the vehicles. At the end, you have the option to buy the vehicle at an agreed price.
Fleet leasing is also much more simple than it might seem. Here’s our step-by-step guide to how to go about securing your a fleet of vehicles:
- Find the vehicle you want.
- Contact Nationwide Vehicle Contracts to get a quote.
- Submit finance check and application for vehicle finance.
- Once accepted, the vehicles will be ordered.
- A payment plan will be established and your financial documents will be sent across.
- Once the vehicles have arrived, a delivery date will be established that is convenient for your business.
- Enjoy the cars for the duration of your contract period. Vehicle and fleet management can be arranged.
- At the end of the contract, you explore the options available and do as you choose.
For more information, check out our Fleet Car Leasing guide.
Fleet leasing has various advantages, such as significant savings, operational flexibility, and improved budgeting.
- Lower upfront costs - Fleet leasing requires minimal upfront costs. Businesses will have to pay an initial deposit (which can be as little as three month's advance rental), followed by fixed monthly payments. This conserves capital that can be allocated elsewhere.
- Fixed monthly payments - Following your initial deposit is a series of fixed monthly payments for the duration of your contract. As fixed payments, they can help make budgeting and financial decisions more straightforward.
- Reduced depreciation risk - When a business owns a vehicle, it assumes the risk of depreciation. In fleet leasing, as you never own the vehicles, you don't have to worry about loss in value.
- Access to newer vehicles - Fleet leasing allows businesses to access newer, more fuel-efficient, and technologically advanced vehicles. This can lead to increased cost savings through improved fuel efficiency and reduced maintenance costs while being great for company morale.
- Flexibility - A fleet lease agreement is available on a contract hire or finance lease agreement, so you can choose based on which one suits your needs. It's also for a maximum of four years, so you can change vehicles to a newer model at the end of your contract. The decision is completely up to you.
While fleet leasing has many advantages, it might not be suited to every business. It’s essential to cover all angles before deciding on a fleet lease agreement and determine if its the right fit for your business:
- Ownership - Your company never actually owns the vehicle and is restricted in terms of what they can and can’t do concerning customisation.
- Mileage - Some fleet lease agreements might include mileage limits, which could be tricky for businesses that heavily rely on their vehicles. If you exceed the mileage, you might be subject to excess mileage charges, which could be extremely costly for a fleet of vehicles.
- Lease terms - Lease agreements often come with strict contract terms, so it’s worth double checking your agreement to ensure you understand everything. One sticking point can be early termination, which could prove costly for a fleet of vehicles.
There are various tax benefits involved with fleet leasing.
If on a contract hire agreement, you can claim up to 100% tax relief, and when it comes to VAT payments, you can claim 50% on cars and 100% on commercial vehicles. You can also claim as much as 100% of the lease rental against corporation tax based on CO2 emissions.
If you go for a finance lease, which is only available on commercial vehicles, you can claim 100% of VAT payments, and the complete cost of the rental can be offset against taxable profit.
Fleet management is essential to ensuring that everything with your fleet runs smoothly. You can choose to do this by yourself or outsource it to your leasing company, who will handle it.
At Nationwide Vehicle Contracts, we offer vehicle management services such as purchasing new vehicles, delivery, roadside assistance, maintenance, and warranties.
Also, for an agreed cost, this can include:
- Arrangement and booking of vehicle servicing
- Dealing with any traffic infringement notices that may be accumulated
- Replacement notification to drivers
You'll also need to plan the day-to-day operations of your fleet. For example, if your lease fleet is for delivery trucks, you'll need to consider where they're stored, how drivers get allocated to a vehicle, and insurance.
This can be a long and arduous process, but good fleet management is worth it in the long run, and if done correctly, your business will reap the benefits.
With the growing popularity of electric vehicles, many businesses are looking towards electric fleet leasing. An electric fleet looks great for a company, shows they care about the environment, and decreases fuel and maintenance costs.
There's also a range of Government incentives for electric fleets, such as tax breaks and charging infrastructure grants to help with initial costs. Check out our Electric Fleet Leasing Guide for more information.
Unsure about what vehicles to include in your fleet? Nationwide Vehicle Contracts is one of the UK's largest leasing brokers, offering a range of leasing deals on cars and vans to suit your every need.
We've also produced two guides on the topic of fleet leasing, Fleet Car Leasing Explained and The Complete Electric Fleet Leasing Guide.
