Commercial Vehicle (LCV) leasing explained
LCV leasing
Your fleet is a major asset for your business, but it’s also a significant investment. With rising demand for LCVs driving up new and used purchase prices, could leasing be a better option for you, and what do you need to take into account? In this article, we’ll cover the pros and cons of leasing, key considerations for leasing LCVs, and the most popular leasing products available.
What is LCV leasing and how does it work?
Leasing an LCV essentially means renting the vehicle for a specified period of time. Rather than paying cash up-front to purchase the vehicle outright, you simply choose a contract length (referred to as the “term”) which is usually between 24-60 months, the mileage limit the vehicle will be driven during that period, and then pay a fixed monthly amount over the contract term.
Because of the lower up-front and fixed monthly costs, leasing offers a flexible and economical way to grow your LCV fleet to meet demand without committing to the full costs (and variable cashflow implications) of purchasing them outright.
The vehicle is owned by the leasing provider, so at the end of the contract you simply return it (although there are options to extend the contract or own the vehicle with some finance products).
What are the pros and cons?
What do you need to remember when it comes to conversions?
Assess how conversions might affect your total rental costs
Leasing companies should be able to offer funding for a range of conversions which can be combined with your vehicle’s finance.
This can help spread out a significant cost across the contract life, however, the conversion might affect the resale value which may also mean higher total rental costs than for a vehicle without any adaptations.
You need to understand what (if any) conversions you need at the outset, which your leasing provider should be able to assist you with, to ensure you are making informed decisions.
Plan for the return (or not) of equipment
If you lease equipment (e.g. modular racking) along with your vehicle, at the end of your contract term (depending on the type of funding) the equipment may need to be returned or bought with a final instalment, often called a ‘balloon’ payment.
If you’re planning to move equipment like modular racking to a new vehicle at the end of contract, make sure the cost of transfers, repairs and refurbishment are taken into account as part of your monthly rental cost to avoid any surprise additional fees at the end.
What if I want to keep the LCV at the end of the contract?
If you want a finance option that gives you some of the budgeting and convenience benefits of Contract Hire but with the option to keep using the vehicle at the end of the contract, it may be worth considering one of the following:
