How do you compare leasing vs buying fleet vehicles?

1 Benefits of leasing

Leasing is a popular option for many fleet managers because it offers several advantages over buying. When you lease a vehicle, you pay a fixed monthly fee for a certain period of time, usually two to four years. This means you have lower upfront costs, predictable cash flow, and tax deductions. You also have access to the latest models and technologies, and you can easily switch or upgrade your vehicles at the end of the lease term. Leasing also reduces your maintenance and repair costs, as most leases include warranty coverage and roadside assistance.

2 Drawbacks of leasing

Leasing also has some drawbacks that you need to consider before signing a contract. When you lease a vehicle, you do not own it, and you have to follow the terms and conditions of the lease agreement. This may limit your mileage, customization, and usage options, and expose you to fees and penalties for exceeding or violating them. You also have to return the vehicle in good condition, or pay for any damages or wear and tear. Additionally, leasing may not be cost-effective in the long run, as you do not build any equity or resale value in the vehicle.

3 Benefits of buying

Buying is another option for acquiring fleet vehicles, and it has its own benefits over leasing. When you buy a vehicle, you own it outright, and you have full control over how you use, modify, and dispose of it. You can also take advantage of depreciation and tax credits, and sell or trade in your vehicle when you want to. Buying also gives you more flexibility and stability, as you do not have to worry about lease terms, fees, or penalties. Moreover, buying may save you money in the long term, as you can amortize the cost of the vehicle over its lifespan.

4 Drawbacks of buying

Buying also has some disadvantages that you need to weigh against the benefits. When you buy a vehicle, you have to pay a large upfront cost, or finance it with interest. This means you have less cash available for other business expenses, and you have to manage your debt and cash flow carefully. You also have to bear the risk of depreciation and obsolescence, as the value of your vehicle may drop over time, or become outdated by newer models and technologies. Furthermore, buying may increase your maintenance and repair costs, as you have to cover them yourself after the warranty expires.

5 How to compare leasing vs buying

To compare leasing vs buying fleet vehicles, you need to analyze your business needs and goals, and compare the total cost of ownership (TCO) of each option. TCO is the sum of all the costs associated with acquiring, operating, and disposing of a vehicle over its lifecycle. It includes the initial purchase or lease price, financing or lease fees, fuel, insurance, taxes, maintenance, repairs, and resale or residual value. You can use online calculators or spreadsheets to estimate the TCO of leasing vs buying for different scenarios and assumptions.

6 How to choose the best option

When it comes to deciding whether to lease or buy your fleet vehicles, there is no one-size-fits-all answer. The best option for you depends on the size and type of your fleet, the frequency and duration of your vehicle usage, the availability and cost of capital, the expected mileage and wear and tear of your vehicles, the importance of having the latest models and features, and the flexibility and risk tolerance of your business. To help you evaluate the pros and cons of leasing vs buying, you should consult with your accountant, financial advisor, or fleet management company to find the best solution for your fleet.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?