Leasing improves financial efficiency

LEASING fleet vehicles can revolutionise the business balance sheet – and firms would be foolish to ignore the benefits.

That’s according to experts at Select Fleet Solutions, the corporate arm of leading UK broker Select Car Leasing.

Sarah Worthington, Head of Corporate at Select Fleet Solutions, says the leasing model can improve financial efficiency, aid risk mitigation, and lead the way when it comes to Environmental, Social and Governance (ESG) compliance.

How does vehicle leasing address those three core pillars of industry – and does it really make more sense than financing your fleet via other methods?

Capital preservation

Sarah explains: “With leasing, there’s no large up-front cost. “Instead there’s a low initial payment followed by fixed monthly payments while the residual value risk of the depreciating asset sits with the funder rather than the lessee.

“Leasing can therefore help to preserve a business’ capital, freeing up funds to seize future opportunities or to weather unforeseen challenges.”

Neutralising residual value risk

Vehicles are far from immune to value volatility, particularly in an era where ever-evolving battery tech is having an impact on EVs.

Sarah adds: “Unless you’re looking to purchase the vehicle at the end of your lease agreement, or there’s a specific residual value guarantee, leasing provides no risk to the lessee when it comes to depreciation.

“As a company, you’re not exposed to fluctuating second-hand values and you’re not saddled with obsolete technology.

“When you lease, you simply hand back the keys at the end of your agreement without having to consider the hassle and cost of vehicle disposal.”

Total cost is key

Sarah: “Compare the total cost of ownership for both leasing and buying when renewing your vehicle fleet. Consider your fleet’s usage patterns and company financials.

“Leasing (also known as Contract Hire) remains the most popular method of financing a fleet vehicle in the UK, thanks to a number of financial and operational benefits.

“Regular monitoring of vehicle fleet utilisation can also help to identify underused vehicles for reassignment or even disposal, as well as pooled mileage opportunities.”

Predictable, long-term ROI

Predictable monthly costs, rather than irregular spikes, are what fleet managers demand. And when you lease, you get the peace of mind and budgeting foresight that comes with regular, fixed monthly payments.

You automatically receive breakdown cover when you lease and VED is included. You can add an optional servicing & maintenance package to your lease agreement which covers you for all scheduled service appointments, repairs, as well as the replacement of worn parts like tyres, brake pads and discs.

With dedicated fleet management services also available, leasing allows you to reduce your administrative burden as well as internal overheads.

ESG considerations

Environmental, Social, and Governance (ESG) metrics matter and transportation is often the largest contributor to a company’s carbon footprint.

Leasing EVs as part of your fleet, and charging them via renewable sources, can lead to reductions in Scope 1 and Scope 2 emissions while smoothing your pathway to Net Zero.

Sarah adds: “Because of the Benefit in Kind (BiK) implications, EVs also make the most sense as part of company salary sacrifice schemes.

“Such schemes are free to implement and improve talent retention and staff satisfaction – all the while companies can reduce their employer National Insurance contributions – because when an employee sacrifices part of their gross salary for an EV lease, the employee’s taxable salary decreases.”

Consider used vehicles for your fleet

Sarah: “Experience lower upfront and monthly costs with carefully inspected, lower-mileage used vehicles.

“In the leasing world, they’re what’s known as ‘re-lease’ vehicles – ie, vehicles that have already enjoyed a round of leasing with a previous customer before returning to the market.

“Like leasing a new car, you can still enjoy the benefits of full maintenance and servicing cover, giving peace of mind to fleet managers.”

Photo by Matheus Oliveira on Unsplash