The Financial Advantages of Leasing Corporate Cars
In the recent past, we have seen many companies opting to lease corporate cars (rather than simply buying the cars). And this is something we see even with respect to companies that have the financial muscle to purchase their own cars. This state of affairs gives rise to several questions. One of those is, naturally, the question as to why so many companies are opting to take this route. Further inquiries in this regard are likely to reveal that one of the major motivations behind the trend is financial. In other words, many companies are opting to lease corporate cars because it is advantageous from a financial point of view. Another question comes up at this point, as to what exactly these financial advantages of leasing corporate cars are. That is the question we will now be attempting to answer.
As it turns out, one of the key financial advantages of opting to lease corporate cars has something to do with the fact that taking this route saves organizations from the risk of falling into cash-flow problems. We all know that cars can be expensive. It follows, then, that an organization opting to purchase corporate cars has to make huge capital expenditures. Those are the sorts of expenditures that can interfere with cash-flow in a big way. But organizations that opt to take the route of leasing corporate cars (the term for that in Denmark is Læs mere om erhvervsleasing) get to avoid such cash-flow disruptions (as the whole arrangement means that they don’t have to make capital expenditures). They only have to make ‘rental’ payments to the owners of the cars. And in many cases, these payments don’t even have to be made upfront.
Another key financial advantage of leasing corporate cars is in the fact that taking this route saves organizations from depreciation costs. It is the owners of the cars (the people from whom the cars are leased) who get to bear the depreciation costs: not the organizations that lease the cars. This is a significant fact, seeing how huge car depreciation costs can often turn out to be in any given accounting period.
Yet another key financial advantage of leasing corporate cars is in the fact that many organizations find the whole arrangement convenient. It is more convenient than buying the cars. Buying the cars would necessitate the expenditure of lots of time in ‘shopping around.’ In organizations with strict procurement systems, it can mean floating tenders for the supply of the cars and going through lengthy supplier selection processes. And having purchased the cars, the organizations in question would have to stick with them when they get old (or find ways of disposing them through the second hand car markets). On the other hand, organizations which opt to lease corporate cars essentially ‘delegate’ the pains of shopping for the cars to the companies they lease the cars from. They also get a chance to ‘delegate’ the troubles associated with disposing the cars to the companies they lease them from. In other words, once the cars start to age, they simply return them to the owners. It is upon the owners to figure out what to do with them. Yet these seemingly simply things often turn out to be very hard for organizations that opt to buy (as opposed to leasing) corporate cars.
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