WHAT is car leasing? It works much like leasing or renting anything else.

Just consider the example of renting a house or flat, where you would pay a deposit
before being able to use the home for an agreed period, paying a set amount of
money for every month of it.

Once that agreed period elapses, the property will be returned to the landlord –
and car leasing works similarly. Here, you will sign a leasing contract taking
account of the mileage you intend to rack up in the car and how long you would
like to use it.

During this contractually agreed duration of usage, you will pay a fixed monthly
fee, while a deposit might be payable before you first get into the car. As the
contract expires, the vehicle will revert back to the company from which you got it
– but should you really go get it in the first place?

Does car leasing make financial sense?

A car bought new will lose value even upon leaving the car dealer’s forecourt.
According to the Retail Motor Industry Federation (RMI), a new car will shed as
much as 15-30% of its value as soon as this vehicle is taken to the road.

As the billionaire oil tycoon J Paul Getty once commented: “If it appreciates, buy it.
If it depreciates, lease it.” If you lease a car, concerns about its falling value will
ultimately be left not to you but instead to the company that will remain the car’s
registered owner right through the lease period.

In the long term, leasing a car can work out as less expensive than buying it –
given that, in the latter case, you would need to shell out more heavily upfront for
the vehicle but could later find that you are only able to sell this car for a fraction
of its original price.

Should your business lease its cars instead of buying them?

If you run a large business, it can probably afford to buy its cars outright. However,
if your business is a small one, such as a startup, it might not be able to stomach
this kind of financial outlay – or at least not in one go.

The British Vehicle Rental and Leasing Association (BVRLA) claims that one in eight
cars on British roads is leased. Leasing cars is particularly business-friendly when
you consider that your company would benefit from keeping its fleet of vehicles
modern and up to date.

This would matter for practical reasons – such as helping to improve this fleet’s
fuel economy and, consequently, what you need to spend on running these
vehicles – as well as your company’s image. A firm seemingly content with
outdated cars would be selling itself short in a competitive market.

To prevent your own business from falling into the same trap, you could consider
going down the business car leasing route with a company like Vavoom, which
would be capable of providing your business with an all-electric fleet on a leased
basis – wherever your business is based in the UK.