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Questions to ask before you buy or lease a business vehicle?

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The decision between buying or leasing a commercial vehicle for your business is not a simple task. There are numerous factors that need to be taken under consideration. Factors such as cost of the vehicle itself, fuel costs, maintenance costs, insurance costs, tolls, parking, and many more.

Not every business is created equal so there is not a universal answer to the question of buying versus leasing. In making this decision, you first have to look at your business’s circumstances. To help you make the best possible decision, we are going to look at some questions that you need to answer for your business. Once those questions have been answered, you can have a better chance at making the right decision for your business by creating that ever-reliable pros and cons list. 

  • What is your cash limit for a down payment?

This is probably one of the most important questions to ask when determining if you should lease a vehicle or not. On average, when you lease a car, not a lot of money is required. In fact, there are some companies that are known for not even requiring a down payment. However, you do need to be aware that the less money you put down in the beginning probably means higher monthly payments. Knowing that you could possibly have a higher monthly payment than you would prefer can be disheartening, but now you have to consider what your payments would be if you had to finance a vehicle. To even be able to afford the monthly payments when financing a vehicle, you want to be able to pay as much money as possible for the down payment. So if immediate cash flow is a problem for you then you probably have your answer to this question. 

  • What amount of mileage do you expect to put on the vehicle?

You need to determine what type of business vehicle you need. Is it going to be just for local usage or do you foresee long trips thus mileage in its future? Typically, leases come with a fixed mileage that can be driven for the duration of the contract. A common contract for mileage on leases is usually around 12,000 miles per year. Some lease contracts can be broken down into months so that would be 1,000 miles per month. For a lot of people that is probably a tight mileage to keep. It doesn’t mean that you cannot go over that mileage; however, you need to be aware that you will be charged a rate per every mile over the contracted mileage. This is very important to take into consideration due to the fact that the rate charged for mileage overage is usually pretty steep and can rake up into a very costly additional expense for your lease.

  • What do you want to do with your vehicle?

It is important to determine your vehicle usage. Is it being used to travel long distances, driven in treacherous terrain, or used in business practices that could have possible lease limitations? As we mentioned earlier, mileage would need to be a concern if considering leasing a vehicle. However, the wear and tear on the vehicle are not of concern to you if it is a lease. If you plan on using your vehicle for construction jobs, there is always the risk of running over debris that can cause damage to your vehicle. Leasing companies do allow for normal wear and tear, but you do have to take care even with a lease not to tear up the vehicle. On the off chance that there is damage, the good thing is that maintenance is usually the responsibility of the leasing company. As far as limitations go, it is imperative to check with the leasing company about restrictions if it is possible that the vehicle could be used for questionable reasons such as medical or hazardous material transport, taxi-like services, or need to enter hazardous locations. Leasing companies do have the right to dictate where and how their vehicles are used. 

By answering these questions specific to your business, you will hopefully have a better understanding of the vehicle requirements your business needs. These requirements should allow you to start making that pros and cons list that will help you down the pathway to determine whether buying or leasing a commercial vehicle is right for your business. 

PG

Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to greensneha@yahoo.in

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