As a business owner, you’re probably used to making difficult decisions. To carefully considering options for what would be a simple choice if it wasn’t for the added financial weight of ‘being good for the business’.
Choosing a vehicle is a perfect example. For personal use, picking a new vehicle is simply a question of finding the crossroads between convenience and cost – you just need a vehicle that meets any speed, size or other specific requirements you might have.
When it comes to a business vehicle rental, the choice can feel much more complicated. Before you even start looking for business hire deals, you need to get a number of different facts about whether buying or hiring is the best option for you.
Here at Paulls Vehicle Rental, we appreciate that any decision around your business is a big deal – and business vehicle hire is no exception. So we’ve put together this guide to help you decide if it’s right for you. We’ll look at the benefits you get with hiring, as well as the disadvantages and we’ll share some tips on how to decide which option is best for you specifically.
Is it worth hiring a car through my business?
Though many – perhaps even most – businesses could benefit from hiring a vehicle rather than buying, this isn’t always the case. Here are some things you should consider before committing to hiring or buying:
1. How much use the vehicle will get
All business vehicle hire companies have a distance allowance you need to stay under. Here at Paulls, ours is 2000 miles per 28 days– which is more than double the average distance travelled by corporate van rentals according to Business Vehicle Rental and Leasing Association.
But if you expect to travel a lot further in your vehicle, then a business rental might not be for you. Particularly if you’ll be doing so regularly. If you go over the mileage allowance, you could end up paying an additional rate per mile, which can quickly become expensive.
If you expect your mileage to stay below the limit, then business contract hire is a much more attractive option.
2. What type of vehicle you need
The type of vehicle you need can have a big impact on whether renting a vehicle is right for you. Most rental companies will have a wide range of vehicles available, and in most cases, you will get an even better deal on your business hire if you choose a van or pick-up.
This can be even more useful if you’re looking for a specialist commercial vehicle to carry out specific tasks, as you can make sure you always have access to the best vehicle for the job at hand.
3. Whether your business eligible
We apologise if this sounds obvious, but it’s actually a bigger issue than you might think.
A lot of business owners like to hire vehicles in the early days of their business. This makes sense, after all, a hire car or van is a great way to keep costs down, and also keep them predictable (more on this later).
However, if it’s too early in your business journey, and you haven’t registered correctly, you might not be eligible for business car hire. (If you want to know more about our eligibility criteria, talk to our team.)
4. How the vehicle will be used
The function of your business could also leave you unable to hire. For example, if you want to use the car as a taxi, a hire car is likely to face restrictions and charges that make it uneconomical, or even impossible.
If your work is likely to cause considerable wear and tear on the inside of the car – more than is considered standard – then purchasing could well be a better option too. Otherwise, you may be hit with heavy charges at the end of the rental.
These are all factors that only you can know about your business. If you’re still not sure, or think there might be more complicated questions around your own business, then speaking to a potential hire company should be your next step.
Benefits of hiring a vehicle through your business
Once you’ve decided if it’s possible to hire a vehicle, your next question becomes whether it’s actually a good idea. Again, this is something that can only be decided on a case-by-case basis, but here are some of the benefits you can expect when you choose a long-term rental vehicle for your business rather than purchase one.
Keeps costs consistent
With a hire vehicle, you make fixed monthly payments. No unexpected expenses from upkeep or repair work that are inevitable when you own a vehicle. Even a new car can run into issues, and not all of these will be covered by your warranty. With secondhand and older cars, the likelihood of repair or maintenance costs arising is inevitable eventually.
Van or car hire removes these costs completely. Not only can you forget about significant repairs, but you don’t even need to worry about MOT costs, service costs, or replacement tyres. Your hire company will take care of everything, under the umbrella of your ongoing payment.
Particularly for small business owners or people starting out, this predictability can really help you with managing your finances.
No downtime for maintenance
Another issue that arises when a vehicle needs to be maintained or repaired is that you’re left without the vehicle while it’s being worked on.
Even when you know you’ll be left without your business hire car or van, this is inconvenient. When a trip to the garage is unexpected, this can get really frustrating and have a significant impact on your business.
With a hire vehicle, you don’t have to wait indefinitely while a fix is found for your car. When your hire car is brought in for upkeep or repair, you’ll be given a new one to use. You won’t be left waiting around for parts to arrive or labour to be found – you’ll continue to have access to the vehicle you need, when you need it.
No large payment upfront
Many business owners would find it difficult to draw together a large upfront payment to buy a new vehicle. Even on finance, you’ll likely need to find a big deposit, and that can be stressful, especially for new and small businesses.
With hiring, you only have to worry about the lower monthly payments, which are a lot more manageable. And, as mentioned above, stable.
Lifetime cost
In fact, the overall lifetime cost of hiring a car is often smaller than purchasing one.
Vehicles are a depreciating asset. Unlike property, where its value increases over its lifetime, vehicles always lose value. When you purchase a brand-new car, you pay a premium price, but the value is immediately lost as it becomes ‘secondhand.’
When you hire a car, this depreciation is factored into the ongoing cost you pay, so you don’t pay an extreme premium for ‘new’. Instead, your hire company factors this.
Even running costs are likely to be cheaper for a rental vehicle. As hired vehicles tend to be newer, they tend to be fuel-efficient. Even if you purchase a brand new car to start with, over the years it will age while newer, more cost-effective alternatives become available, and you won’t be able to take advantage without sinking another significant amount of money into a new vehicle.
With business rental, you’ll get a new vehicle at defined intervals – even if you’re renting for long-term use – and you’ll reap the benefits that brings.
More convenient
After arranging your hire agreement, the majority of your admin is done. There is no need to arrange road tax or stay on top of MOT dates. There is no need to update the vehicle log, and when you’re finished with it, you can just return it to the vehicle hire company. You don’t need to sell it or exchange it, or worry about replacing it because the hire company takes care of it all.
There is also plenty of added convenience when you hire a commercial or personal vehicle from a company committed to customer satisfaction. The benefits we provide include collection and delivery of vehicles, flexible contracts and competitive prices
Is long-term rental for business use more tax efficient?
One of the biggest benefits of hiring a business vehicle is how tax-efficient it is. The exact efficiency will depend on how the vehicle is used (for example, if it’s also used for personal journeys, you won’t be able to completely offset it – you’ll need to pay company car tax, which can add to the overall cost implications).
However, if you have a limited company and the vehicle is only used for business purposes, you may offset up to 100% of your rental payments against your corporation tax as a business expense. If you have hired a van rather than a car, you can claim 100% regardless of the vehicle’s emission rate.
What are 3 disadvantages of hiring a car for your business?
There are a lot of benefits to business car hire, however, there are some potential downsides too. It’s important you take these into consideration before deciding if purchasing or hiring is the right move for your business.
No modifications
You’re not able to modify a hire vehicle, and when it comes to a business vehicle that can be an issue. For example, you won’t be able to add branding or signage that advertises your business on the outside of the vehicle and this can be a great option for low-effort advertising for business owners. It’s definitely something to consider.
Mileage allowance
We already mentioned how the mileage limit can be a deciding factor on whether vehicle hire is right for your business. Excess mileage charges can quickly mount up, and if you’re earning them regularly, they can turn your monthly lease payments from a saving to an unnecessary expense.
Of course, many hire companies offer a generous mileage limit that should be more than enough for standard business use – and already exceeds personal hire limits. Make sure to confirm with your hire company what their restrictions are, and this might not be a factor at all.
No ‘ownership’ of a vehicle
Some people see the concept of owning a vehicle as a benefit in its own right. A benefit you don’t have if you hire your business car or van instead. For some people, not having an ‘asset’ you can sell at a future date could be seen as a disadvantage.
For us, this is a complicated consideration. After all, as we’ve covered, vehicles depreciate their value rapidly after purchase – when selling a vehicle, you will always make a significant loss on what you paid for it originally – and that’s without factoring in ongoing maintenance costs.
You’re also faced with the hassle of finding a buyer and arranging the sale.
However, some people would prefer the peace of mind that comes with ‘owning an asset’ – if you feel that way, vehicle hire might not be the best choice for you.
Is long-term business hire the right choice for me?
At the end of the day, the answer to whether personal car hire or business hire is best for you depends on your individual circumstances, though we hope this article has left you better placed to decide that.
If you do still have questions or if you’re considering hiring a vehicle in the Leicestershire area, then our team will happily provide the answers you need. Talk to us today to find out more.
