Could leasing company vehicles be a viable alternative to owning?
Businesses that use vehicles on a regular basis could be holding on to depreciating assets for too long, according to Birmingham-based Lex Autolease.
The firm revealed UK SMEs could be holding on to £6.7bn of depreciating vehicle assets and that they choose to replace on a constant basis rather than lease.
This can require a considerable outlay and for businesses operating on tight financial scales, this can severely impact the cash flow of the company.
Many work vehicles depreciate very quickly due to the levels of stress they are put under as part of their working role, and this can mean they need replacing on a more regular basis.
Money tied up in these assets is being wasted away and this could mean the firms concerned are missing out on potential growth opportunities.
Assessing your available options
Should this impact on the cash flow of a company, business turnaround methods could be an option to improve the situation.
Alternatively, opting to lease, rather than own, could save money for businesses in the long term and also improve the standard of vehicle options available.
The Leasing Revolution report from Lex Autolease estimates that 68% of the 1.5m vans and light commercial vehicles that are registered to British businesses are owned.
In these cases, the report states that the majority were purchased using cash reserves or a bank loan, placing additional pressure on finances as a result.
The average van or light commercial vehicle that is owned by an SME is currently around eight years old – with estimates suggesting each vehicle will have depreciated by more than £10,000 in that period.
As a result, this could potentially limit the long-term possibilities for the companies concerned as money could be better spent on other aspects of business.
New growth opportunities, the payment of debts or business infrastructure improvements could all be considered were less money to be spent on vehicles.
When considered in the long-term, the costs of leasing are considerably below those of buying, offering an alternative to businesses that maintain success, while promoting growth potential at the same time.
By Phil Smith