The Best Vehicle Investments For SMEs
When you’re a small company, saving money in any way is essential to becoming profitable and staying afloat or expanding. Office space can play a big part in this, with the likes of energy consumption being a main way to cut costs. Outsourcing projects is another, with many companies choosing to outsource work to freelancers instead of hiring full-time members of staff. This means that when you don’t have an influx of work, you won’t be needing to pay for a lack of productivity.
For some businesses though, vehicles are essential. However, many don’t realise the benefits, or exactly which vehicle they should be looking at. Here, we look at which cars are best suited to a business and whether it’s more beneficial to buy or lease.
Types of vehicle suited to industries
Of course, it goes without saying that an electrician will require a different style vehicle to a café owner. However, a company in the catering industry could be best suited to a ‘white van’ like the electrician’s business, too. This is because space is the primary concern, so that all the tools can easily be transported between locations.
However, for a café or small shop, you may use your vehicle more as an advertising tool. By driving between clients, or just from A to B, and having your brand predominantly on show, you are reaching a wide target audience. In fact, UK government stats have found that the average driver is behind the wheel of their automobile for a total of one month each year, meaning that up to 3,000 people may see your vehicle every day. That can work out to as little as 4p per 100 sightings of your vehicle. Radio advertising can cost £1.21 per 100 interactions, meaning that a vehicle wrapping method can be very cost-effective. What’s better is that it can last up to five years!
Perfect models for this style of advertising include the Volkswagen up!. While it’s one of the manufacturer’s smallest cars, it still offers the same premium feel of its other models. The Telegraph states that it’s a cheap-to-run vehicle that holds its value well and can come as an all-electric model, meaning it can be very cheap to run.
Ultimately, how your business will use your fleet will dictate your type of funding…
Why lease?
Research has found that 32% of small business owners feel overwhelmed when it comes to vehicle management administration, with a third of respondents claiming to spend a huge chunk of their day handling fuel expenses and claims. With the survey finding that admin tasks are overwhelming nine out of 10 respondents, choosing a leasing option for your fleet can significantly reduce the amount of time spent on this issue.
Although this is the case, many still believe that leasing is too expensive. However, there are many deals out there to take advantage of. For example, leasing a car means that you won’t feel the depreciation of the vehicle to its full effect. While buying a car makes it solely yours, if you bought a brand-new model, it may lose up to half its market value in the first two years. For a small business, this is a huge outlay to simply be ‘losing’.
Also, as the vehicle won’t technically be owned by your company, you don’t have it appearing on your balance sheet and can treat your leasing payments as an expense. This means you can usually deduct it from your profit.
Then there’s the factor that you will more likely be able to afford a new car if you take it out on a lease deal. As technology in new models is allowing them to be more fuel-efficient, you can find yourself saving money in the long-term on your travel expenses. As well as this, the first three years of a vehicle’s life are the most reliable, meaning there shouldn’t be great expense needed for repair bills. Even if there are, this time period is normally protected in the manufacturer’s warranty.
Why buy?
If your vehicle is going to be used regularly for long distances, purchasing it outright is likely to be your best option. This is because it will allow you to not worry about penalties due to mileage that can often be written into your lease agreement. If you feel that your car or van is likely to pick up damage, purchasing second-hand vehicles would be the best option.
Once again, this is due to avoiding penalties that any damage will inevitably bring when the vehicle is not yours. This sort of vehicle is typically the choice for manual labour companies who need a no-frills vehicle to commute between jobs.
There are many reasons why SMEs should start to acquire vehicles to help with their growth. However, it’s crucial to fully research which financial option will be best for your business before you jump into it.
Sources
https://www.telegraph.co.uk/cars/driving-for-less/leasing-for-businesses/
https://www.telegraph.co.uk/cars/volkswagen/volkswagen-up-review/