Is It Better To Hire Or Buy Commercial Vehicles?
When maintaining a fleet of commercial vehicles, it is crucially important to understand the most cost-effective methods in doing so.
In fact, a booming economy and a growing business is still not enough to make this an easy task. However, against the backdrop of Brexit, depreciating value of the pound and a shift to more short-term contracts in industries like construction, this challenge has become even harder.
However, there can be one certainty. Under the current political and economic environment, fleet managers are finding planning for the future much more difficult. This has led to many finance directors considering their decision of whether to hire or buy commercial vehicles.
Should I Buy?
Previously, you may have identified a number of advantages when buying vehicles for your fleet. It’s a way of investing unused capital, there are certain tax benefits such as write-down allowance, mileage on each vehicle is unrestricted, and you may even find bargains in the LCV market.
On the other hand, buying vehicles can result in large amounts of capital being locked up. Vehicle values tend to depreciate quite quickly, so if you need to unlock that capital you will lose a significant amount of it. Also, if you lose a contract – or a short term contract isn’t renewed – you can find some of your fleet standing idle. In addition, you will also have to pay fluctuating amounts for fleet maintenance.
Furthermore, there is a danger that your vehicles may not meet the standards agreed upon within contracts as the vehicles age. For instance, it may be that a contract requires vehicles to meet low emissions and safety standards.
Due to current economic times, these challenges are forcing many finance directors to consider the reasons for buying vehicles. This would not be a problem if there was no uncertainty, however it is most likely that unpredicted problems will occur. Therefore, there is a genuine risk of locking up valuable capital should there be any uncertainty surrounding contracts.
Should I Hire?
At this time, many fleet operators have been attracted to the flexible hire packages available from commercial vehicle hire companies. Such packages involve fixed cost rentals which allow you to return vehicles at short notice without penalty. Flexible hire is an attractive option for businesses with fluctuating vehicle needs as well as those who specialise in short to medium term projects that require LCV’s. With the growing uncertainty of contracts in some sectors, in addition to the challenges of both the economy and Brexit, flexible hire now presents an effective solution to many fleet operators.
Key Benefits of Hiring
- Fixed Weekly/Monthly Cost – Cash flow becomes more predictable and easier to manage.
- No Depreciation – No loss of capital when vehicles are replaced.
- New Vehicles – Which are reliable and meet legislative and contractual standards.
- Maintenance Included – This is included in a fixed monthly cost and gives you peace of mind, knowing there won’t be any unexpected bills to plan for.
- Less Downtime – Flexible Hire provides replacement vehicles if one of yours is being repaired or maintained, to ensure that you’re business is always driving forward.
- Bespoke Vehicles and Equipment – It’s more economical to fit additional features; equipment such as telematics, roof racks, beacons, tow-bars or cages for specialist jobs.
- Less Red Tape – You spend less time on sourcing and maintaining vehicles, and you know they are compliant with all legal requirements.
As with everything, there are a couple of downsides to hiring vehicles. You may face mileage restrictions and, of course, you won’t have an asset at the end of the contract. But given the growing risk of ending up with your capital locked up in commercial vehicles you don’t need, this could very well be a major benefit for your fleet.
Last, but not least, you always need to make a financial comparison of the cost of buying vehicles versus hiring them. But the question in today’s climate is whether you can reliably predict the cost of buying vehicles if you can’t be certain you will need them for the medium to long-term. It’s great having a fleet of shiny new vehicles, but if business contracts fall through, then they can quickly turn into very expensive decorations for your organisation’s yard.
How To Hire
Stay up to date
Keep up with all of our special offers, new vehicles and company updates by following our social media pages below!