The Best Car Leasing Advice For Startup Businesses
More and more people are thinking of starting their own business, probably to be their own boss, pursue a personal passion, or enjoy the flexible working hours. While this sounds exciting, it also presents all sorts of challenges. For starters, having access to a car is becoming a necessity for most businesses –whether it’s a fleet of vehicles for the business’s sales force, luxury cars for client dinners, or a large van for deliveries. Buying a new car outright doesn’t seem like a viable option. It will only tie up the much-needed capital in assets, which would be better spent growing the business. This is where car leasing becomes a potential financing option to consider.
Why Is Car Leasing An Option For Your Start-Up Business?
First off, you get to drive a brand-new set of wheels at a much lower cost than you would if you bought the car. You can also incorporate car maintenance and servicing costs into a single monthly payment, making car leasing more cost-effective and hassle-free. A car lease contact usually requires an upfront payment at the beginning of the agreement, followed by regular monthly payments over the course of the lease term. The vehicle goes back to the leasing company at the end of the lease term, although other options are available. Your accountant should be able to advice on the pros and cons of your situation.
What You Should Do before Applying for A lease
Just like any other financing option, it’s important to assess the situation and do due diligence before committing to a lease contract. Most start-ups experience difficulty being approved for finance due to lack of trading history. Finance companies will take into account your affordability and the risk of you defaulting on your lease when reviewing your application. The good news is you can improve your chances of getting approved by simply preparing a few things beforehand. For instance:
Have the Right Documentation
If you are leasing through your business, you’ll need to prepare proof of trading, an opening balance sheet, at least three months of management accounting information, audited accounts and bank statements, proof of ID and address for company directors (their credit may also be checked), previous business history (if any), and so on. Personal leasing, on the other hand, may seem simpler to execute but you’ll end up losing the VAT benefits.
Be Prepared To Offer a Personal Guarantee
Even with all the above documents, some finance companies still won’t finance businesses that have been trading for less than 2 years. This, and if your business doesn’t have enough credit to qualify for a lease payment plan, may require you to guarantee the lease contract on a personal level. You can lease through your business still, but you’ll also be held personally responsible if repayments aren’t made. Be sure to come up with the most suitable terms for you.
Consider Customised Solutions
Choosing the right company car(s) greatly depends on the business’s needs. If you’re in the market for a simple passenger car, then perhaps you should consider what you would when leasing or buying a car for personal use. On the other hand, businesses that need heavy-duty options, fleet vehicles, or vehicles with very specific features should consider working with a dealer to help create a customised solution. Consider working with a dealer that offers commercial services. They often have access to different programs to get you the best deal possible, and will ensure your vehicle choice is set up to handle your commercial needs.