Car leasing: a credit lifeline for SMEs

Acres of newsprint have been devoted to small and medium businesses’ struggle to secure adequate financing from the banks. But these media stories often overlook the availability of alternative sources of funding that SMEs can still tap into.

For example, a recent survey found that nine out of 10 fleet decision-makers in SMEs still prefer to buy company vehicles outright rather than leasing them.

Buying, managing and selling vehicles is also a time-consuming business. At a time when many companies’ revenues and margins are under unprecedented pressure, directors might well ask whether their business should be running what is essentially a vehicle trading side-line alongside its core activity.

Naturally, a new car will depreciate whilst incurring costs for servicing, maintenance and repair.

An operating lease (contract hire) has many immediate advantages over outright purchase for small businesses:

Lower monthly payments. Usually lower than HP because the contract funds only the car’s depreciation over a set period of time, not its full purchase price.

Lower administrative burden. Online reporting and ordering, service booking for drivers, even insurance all covered in your fixed monthly rental payments.

Flexibility. If a customer’s circumstances change, most leasing companies will allow a review of arrangements. Optional safeguards like early termination insurance also eliminate any worries about having to return cars early.