Who Leases?

The types of business that lease, or more accurately finance vehicles, range from the butcher the baker the candlestick maker to large multinationals. In business, cash flow, profit and sales are always the main factors to focus on and vehicle finance can make the running of a business much easier and more tax or vat efficient. Service is the important binding catalyst but without cash flow, profit and sales you have nothing.

Why Lease?

It is well known in business that cash flow is survival and profit is progress. Financing vehicles or capital equipment eases the cash flow so that valuable working capital can be used in more profitable areas of the business and not in a depreciating asset. Is there interest to pay? Of course but as interest is lower than ever the profit a business can generate by ploughing the money back into the business is far greater than the low interest we are charged in today’s marketplace.

Would you consider paying your staff their annual salary on January the 1st and ask them to go and work for you for a year. This sounds a ridiculous scenario doesn’t it. You will pay them a monthly payment while the company profits from the benefits from them working for the company. This is called “use without ownership”. A business can profit from the use of an asset without needing to own the asst outright. A business doesn't need to own a car, a van, a telephone system, staff etc to get the benefits of making profit from using them. In fact there can be some definite downsides to owning them outright, especially in difficult trading situations where the business would benefit from better cash flow.

A director of a large International company once said to me the cash flow problems a small one man band as compared to a large PLC are the same, there are just a different number of noughts at the end. 

So, the question was “who lease”. The answer is that everybody lease and our customer base ranges from plc’s to small businesses with one car or van. The challenges all businesses face are largely the same they just differ in magnitude. The cash flow and profitability challenges are similar for big or small businesses, they just have a different number of zero’s on the cash flow or the profitability.

Financing vehicles by use of the most suitable tax and vat efficient method can ease these challenges.