Despite fears of a post-election recession, small business optimism is growing, with 64 percent of small business owners saying that their current business conditions are either good or excellent, according to the Capital One Small Business Growth Index released in Fall 2019. The US economy has been growing steadily over the last decade, and many business owners are confident that this trend will continue regardless of the outcome of the 2020 presidential election.
As your business grows, there will come a time when you need a business vehicle to deliver goods to clients, get to client meetings, transport business assets, or run other key business errands. When that time comes, you have two options: you can either lease or buy the vehicle. You need to carefully consider each option so you can choose the one that works best for your unique business.
When buying is the better option
If you choose to buy a business vehicle, you can either finance it and get your title after a few years when you’ve paid off the loan, or you can pay the full price right away and drive off with the title in your pocket. The main reason why you’d want to buy your business vehicle as opposed to leasing it is that you have the freedom to use it as you wish. You don’t have to worry about any use or mileage restrictions, and you can modify any part of the vehicle if you need to.
You can also sell your vehicle whenever you want, including the day after buying it, which allows you to change vehicles as your needs change. However, buying a business vehicle requires a lot more due diligence due to the higher cost involved, which is why you must be careful when doing it. Make sure you compare different vehicle features and ratings to find the one that serves your business needs perfectly.
When leasing is the better option
Leasing allows you to use a business vehicle for a predefined period while paying fixed monthly payments to the owner of the vehicle, usually a leasing company. When your lease ends, you can either extend it, get a new lease for a different vehicle, or go back to having no vehicle if you feel you no longer need it. The main reason why you’d opt for a lease as opposed to buying a vehicle is the lower costs involved: you don’t have to worry about paying a huge deposit, and the monthly payments are usually lower than the installments you pay when financing a vehicle.
This frees up cash flow to be used for other business needs. Leasing also allows you to enjoy the newest car technologies, since you can easily swap out the old vehicle for a brand new one every few years. The trade-off is that with leasing, there are many restrictions on how you can use the vehicle, and you have to maintain it at the highest standards to avoid fines.
Choosing whether to buy or lease a business vehicle starts with self-reflection. Every business is different, and what works for others may not work for you. What you end up choosing will depend on your current financial situation, your automotive needs, and your plans for your business.