Fleet Leasing

We have a number of guides designed to explore the different funding methods available for your company’s fleet, and this one will look in detail at leasing your fleet.

What is Fleet Leasing?

Fleet leasing is simply when you lease all or part of the vehicles that are in your business’ fleet.

These vehicles can be a company car offered to a particular driver and be theirs to drive for the duration of the contract, a pool vehicle that is used by various drivers throughout the lease as it’s needed or a work vehicle that remains on site.

Depending on the company’s needs you can lease cars, minibuses, vans and even modified vans like a fridge van or catering van.

How Does Fleet Leasing Work?

Leasing your fleet vehicles is a straightforward and simple process that can help rejuvenate your company vehicles, improve driver morale and reduce the time and costs spent looking after the fleet.

With leasing, you will select the vehicle model you would like, how many months you would like to have the vehicle for, the annual mileage allowance and then agree to the monthly rental payments and who will be responsible for the maintenance.

If you decide that leasing is the right option for your fleet, or even if you just want to discuss whether it’s the right choice, then please give us a call on 01722 322 888.

Benefits of Fleet Leasing

There are a number of benefits that leasing can bring to your fleet over other vehicle sources and we’ve rounded up the best ones below:

• It’s cost effective and cheaper than buying a new vehicle outright as you pay for the depreciation of the vehicle rather than the full value of it
• You can establish a fleet with minimal upfront costs and budget for the fixed monthly costs
• If you opt for a maintenance package scheduled servicing, maintenance and MOTs will be completed during the contract
• You will be able to add signage provided this is removed before the end of the contract to help increase brand visibility in the areas your drivers travel
• No concern about vehicle depreciation
• No worries about having to sell or dispose of the vehicle at the end of its life, or decide when the right time to do so is
• Businesses can claim back up to 100% of the vat on monthly costs depending on whether it is solely used for business travel or is also available for the driver’s personal journeys

Considerations for Fleet Leasing

There are a few things that you will need to consider when deciding whether leasing is the right choice for your business fleet.

You’ll want to consider the needs for each vehicle and whether these would be best met by a lease vehicle.

As part of this, you’ll want to think about the mileage the vehicle is expected to travel. Lease funders have a minimum and maximum annual mileage allowance and the monthly cost changes depending on the mileage allowance on the contract. Most funders will allow an amendment if you find after a year the vehicle is doing more / less than expected provided it fits within their limits.

Another factor you’ll want to bear in mind is that the vehicle will need to be returned at the end of its lease, and so if your work vehicles are heavily used and frequently transport goods that could increase the wear and tear to the vehicle above the accepted return condition.

Business leases can be of varying length from two to five years and so you’ll want to consider how long you want the agreement to last and how often you want to be updating and replacing your fleet.

You’ll want to consider this for each vehicle in terms of your monthly budget as well, and whether the vehicle and contract you are looking at will fit into this. Most businesses find it useful to set an amount for each vehicle and let their drivers know which models will fit into the budget for their car. If Wessex Fleet are helping you to source the new vehicles then we will be able to assist with this.

Why Should I Lease for My Fleet?

We've looked at the pros and cons above of leasing for your fleet vehicles and we know that for a lot of our clients leasing is the best funding option when they're expanding or updating their fleet. 

Leasing is a great way to be able to provide your employees with brand-new company cars every few years, without the worry of a depreciating asset on the company books. It also takes care of some of the associated costs / admin of fleet ownership with the road tax covered as part of the agreement and optional maintenance package for the servicing, MOTs and other maintenance work. 

Methods of Funding Fleet Leasing

There are two main ways in which you can lease a vehicle as a business: contract hire and finance leasing.

They are similar in a number of ways, for example both have a contracted lease period and regular monthly payments, but there are also several differences between the two. We’ve broken down the two below so that you can see both the similarities and the differences to help you decide which might be the better option for you.

Contract Hire

Business contract hire agreements are designed specifically designed for companies to use and are essentially a long-term rental, where the business leases the vehicle for a set period of time and pay a fixed monthly cost for the duration of the agreement.

As you can see from the image above the cost of the lease is split between an initial rental payment and fixed monthly payments following this for the duration of the contract.

This amount will be the same in total but you can reduce the monthly rentals by paying a larger initial payment.  

Contract hire leases offer you:

• Flexible contract lengths ranging from 24 to 60 months
• Low and fixed monthly costs
• A brand-new vehicle every few years
• No vehicle depreciation concerns

Though there are many benefits to business contract hire there are some factors you will need to bear in mind when deciding if it’s the right choice for your business.

There won’t be the option to purchase the vehicle at the end of the contract as there is with a contract purchase agreement.

You will need to stick to the contracted mileage allowance, unless you decide to make an amendment but this may affect the monthly payments, and you will also need to return the vehicle in line with the BVRLA’s fair wear and tear guidelines.

Finance Leasing

The second leasing option for businesses is a finance lease, this type of lease is only available for business customers.

This differs to a contract hire in that it gives you a number of options to choose from at the end of the agreement.

As you can see above there are three options available for you; returning the vehicle to the funder for them to be sold, selling the vehicle yourself to a third party on behalf of the funder, or entering into an agreed second lease paying a peppercorn rental.

With a finance lease a proportion of the vehicle, including interest and costs, is charged to you over an agreed upon fixed period of time through monthly payments. You can choose to pay the entire cost over equal payments over the contract period or to pay lower monthly payments and have a larger balloon payment at the end, which is based on the anticipated resale value.

With a finance lease the way in which the payments are calculated is also different to a contract hire agreement, as you are paying for the value of the vehicle over the duration of the contract. As you are leasing the vehicle it will remain the property of the lease funder but as you are paying for the vehicle’s value it will show on your balance sheet as an asset.

There are a number of benefits with a finance lease and these include:

• Flexible payments in terms of initial rental and balloon payment amounts that will reduce the monthly payments
• Businesses can claim back up to 100% of the VAT on a finance lease depending on whether the vehicle is used for personal use as well as business use
• Companies can claim back 100% of the VAT on any maintenance costs
• You choose the mileage of the contract
• There’s the option to extend the lease at the end of the contract so you can keep the vehicle for longer if needed
• As the vehicle shows on your balance sheet it will be a company asset

Other Funding Methods