Business car leasing is arguably the most common type of leasing in modern society, beating out even its equally popular personal variant. This is mostly due to the fact that many companies and corporations choose to have company cars for their employees, and tend to lease the majority of these vehicles from specialist companies.
Still, as common as this process is, there is still a degree of confusion among the non-initiated as to what exactly distinguishes business car leasing from business car rental. It is this distinction that the lines below attempt to make clear, by outlining some of the main differentiating points between the two practices.
Leasing Versus Renting
Before delving into the particularities of business car leasing, it is important to define exactly what is meant by this term, and how it differs from the other popular operation involving the temporary ownership of vehicles, car rental. The answer to this conundrum is actually quite simple, and mostly related to the duration of the contract; specifically, car leases tend to be long-term deals, usually spanning a period of years, whilst car rentals are typically shorter in scope, usually lasting only for a few days or weeks. As such, a car lease involves a significantly higher number of obligations than a car rental, both on the part of the company and on the part of the lessee themselves.
Another major difference between car leasing and car rental has to do with the mile cap on the vehicle. A lease car will typically have an allowance of between 12.000 and 15.000 miles per year, after which the lessee will be required to pay a fee for every extra mile. Similarly, lease cars are subject to depreciation over time, a problem which is not relevant to rental cars, as they will typically change hands frequently, as opposed to once every few years, and tend to not be brand new when rented to customer. Fundamentally, however, both processes are similar, with the amount of time each contract is celebrated for being the main differentiating factor between the two.
What Does Business Car Leasing Entail?
When taking out a car lease, there are typically a number of factors which are non-negotiable, while others can be customised and set to each client’s specifications. The latter tend to include the capitalised cost, leasing’s equivalent to a selling price, the money factor, or interest rate, and the trade in price of any vehicles which may be included in the deal. Non-negotiable factors tend to include residual value, that is to say the value of the car at the end of the deal, and the acquisition fee. Other factors, such as the disposition fee, charged for selling the car at the end of the lease, and the eventual buy-out price for the car, may or may not be negotiable depending on the lease. In the specific case of business car leasing, certain companies may be open to negotiating a bulk price for an entire fleet of cars, so customers should not be afraid to enquire into this possibility.
In addition to these factors, lessees should expect to be charged for extra mileage, as detailed above, and any excessive wear and tear the car may present at the end of the lease. In return, the lessor, that is to say the leasing company, agrees to pay for maintenance and insurance costs for the vehicle for the duration of the lease. It is this latter factor that makes personal and business car leasing so popular, as it often allows both private lessees and companies to save a considerable amount of money in insurance fees and repairs.
It has hopefully become apparent, then, that business car leasing and business car rental are two significantly different types of operations, with significantly different obligations on the part of both the customer and the provider. This knowledge will hopefully help companies know what to expect and how to act when taking out a business car lease.