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Hiring Vs. Buying – Which Will Save My Business Money?

Whether you are looking to invest in one or a fleet of commercial vehicles there are many things to take into consideration, including many financial decisions; one of which being the hiring versus purchasing debate. As with any aspect of your business, your decisions will be mainly financially led and choosing the right way to obtain a fleet of vehicles is essential.

 

Hiring Vehicles Buying Vehicles
Initial Cost Low up-front cost for newer/more expensive vehicles Large upfront cost (new); lower if buying used
Long-Term Finances Long term is easy to manage; hiring can stop at any
point
No real long-term cost if paid for in full upfront
Depreciation None – fixed rate paid.Depreciation doesn’t affect costs. 40% in 1st year,(new); 15% per year over the vehicle’s life
Flexibility Vehicles can be changed based,on needs in one hiring package. Existing vehicles must be sold to finance replacements

 

Initial Costs

Initial costs will vary from vehicle to vehicle, but generally if you’re buying your van or car then the upfront cost will be significantly higher. This will be particularly high if you’re buying the vehicle new; depreciation is also something to consider but this is later down the line.

Buying used will reduce the impact of this initial cost, and helps you avoid as much depreciation in value. This lower upfront cost means that buying used is far more cost-effective, particularly for smaller businesses without the capital to fork out for a brand new vehicle.

Comparatively, though, hiring vehicles offers the lowest of all upfront costs. If this is something that’s particularly important for your business (e.g. you’re a small start-up without the money to invest in buying outright) then this is the best opportunity to get the right vehicles.

Lifetime Cost / Long-Term Cost

Weighing the cost and benefit of hiring your commercial vehicle against purchasing in terms of monthly cost is probably the first thing you think of when making that all-important decision. But it is vital to also weigh up the life-time costs.

For example, you could vote in favour of purchasing due to the manufacturer warranty, but once that expires you could find yourself at a disadvantage. You may find yourself paying out for services that would be covered if you had chosen the hiring route; such as insurance and breakdown, for example.

Vehicle Depreciation

Another aspect to consider is the return on your purchase. Unlike with hiring, you have the option to sell your car when you no longer want it, giving your business some capital to use when buying a fleet of newer vehicles and reducing the initial financial impact.

However, when you contemplate the miles you will spend on the road and the costs of maintenance and bringing your car back up to scratch before you sell it on, as well as general depreciation with age, then depreciation could leave you feeling somewhat short-changed when it comes to selling your vehicle.

When taking vehicle depreciation into account remember:

  • A new vehicle will decrease in value by approximately 40% within the first year.

  • Depreciation slows with age, so purchasing a used vehicle may be a more viable option.

  • On average, annual depreciation rate is 15%.

When you choose to hire, although you will be paying for the privilege, you won’t have to consider vehicle depreciation at all.

Flexibility / Vehicle Upgrades

Once you have signed a contract for a vehicle, you will have to wait until you are in a solid financial position before upgrading, which could leave you trailing behind other companies that have the funds to invest in the latest models that utilise better technologies.

With a hired vehicle you have the option of changing your model at the end of your contract should you wish. This enables you and your company to maintain the use of up-to-date models that meet the needs of you and your customers.

While both involve a specified amount of waiting time, hiring a vehicle ensures that you know the exact amount of time is on your contract before you can consider a change. This allows you to plan far easier, taking both business objectives and financial structures into consideration.

Here at Solar Self Drive we have a range of commercial vehicle options, including both hire contracts and used vehicles, so whichever route you choose, we are confident you will find a price and service worth investing in. Take a look at our van hire pages or our used vehicle sales here – we’ll take care of the rest!

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