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Lease vs Own
making the decision whether to buy or lease vehicles for your company’s fleet, there are many factors to consider. There are short and long-term benefits, and we will walk you through some of the main differences between the two options.
Financial Benefits
Basically, leasing a vehicle means that you only pay for the portion of the vehicle that you use, where buying a vehicle means that you pay for the entire cost of the vehicle regardless. Purchasing can provide your business with valuable assets. However, unless your company is cash rich and can afford to buy your vehicles without financing them, you will pay a higher monthly payment than you would if you were to lease. By leasing, since you are able to spend less each month, your capital can be utilized elsewhere to grow your business.

Depending what you select for a lease, as there are different types of leases, you earn different financial benefits for your company. With the operating lease you can obtain tax benefits by deducting 100% of your lease payments from your income statement. Or, you can claim depreciation and deduct the interest expense from your lease payments under a capital lease.

Incentives and Discounts
When partnering with Executive fleet Leasing, you can be sure that you will always find discounts and incentives due to relationships built with the auto manufacturers, buying power leverage based on volume, and other negotiated services that save you both time and money.

Sales Tax Implications
The impact of sales and use tax can vary dramatically based on whether a vehicle is leased or owned. Consider this in 35 states; tax is applied to the lease vehicle's monthly rental payment instead of being an up-front charge against the vehicle's initial purchase cost. Paying taxes on the monthly payment stream not only reduces the total tax paid, but also improves cash flow.

Balance Sheet Treatment
One fundamental difference between leasing and ownership is the potential financial accounting treatment. Depending on how it’s structured, most leases may qualify as an operating lease in accordance with FASB 13. This allows the lessee to expense the lease payment up to the amount utilized for business purposes.

Company Image
When owning your fleet vehicles, you run the risk of the vehicles looking poor if you are unable to maintain them. Now when leasing your fleet, you are able to keep your employees in the latest model vehicles which will keep your drivers in the newest technologies – including better navigation, communication and safety features when relying on older vehicles. Not to mention, leasing newer vehicles reduces the amount of maintenance issues that otherwise fall on an older and aging fleet that you own.

managing a fleet requires resources to be committed to ordering new vehicles, selling used ones, monitoring fleet incentives and conducting maintenance activity. These tasks require specialized skills and dedicated resources. The use of a fleet management company provides a low-cost way to out-source these necessary activities. A fleet management company handles workflow fluctuations and keeps up with constant changes in manufacturer redesigns and incentives.
Great recommended article by Bobit. Click here to read!
Company Car Vs Car Allowance
Published in Bobit Media’s Jan. 2008
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