Is short-term car hire a better option for your business than a company car scheme?
The flexibility to return and replace cars more frequently appeals to employers, despite it being more expensive than a long-term lease.
One company promoting short-term leasing is Manchester-based Equalease. Managing director Paul Ashton says demand for the service has actually grown during the recession. “This was a part of the company car market that had been neglected, but we are seeing companies willing to pay a premium to retain flexibility and lessen their commitment to a specific leasing company,” he says.
Growing recruitment levels are already providing a boost to short term company car leasing in 2010 says Ashton. Probationary staff often expect a company car, but many employers no longer operate a pool fleet out of which one could be provided.
“Until the emergence of short term leasing, the only option was daily rental, which can prove very expensive if the car is to be retained for three or six months. However, using a medium term lease, you can provide a car such as a Volkswagen or a BMW and the premium for the short term commitment is only around 20% above the cost of a long term lease,” he explains.
“What seems to be happening is that companies are keen to retain a high degree of flexibility as tough economic times continue and many feel more comfortable with a medium term lease than a long one. They are willing to pay a small premium in order to lessen their commitment to the leasing company.”
Medium-term agreements
Equalease provides leases of between three and 12 months on cars that are less than two years old. The agreements include a standard annual mileage allowance of 1,250 miles per month, maintenance, breakdown cover and road tax. A Volkswagen Golf 1.9 TDI Match five-door manual costs £280 plus VAT per month for a six-month lease.
At the end of the short-term car leasing period, you simply return the vehicle to the leasing company and walk away. There is no option to buy the vehicle although if you choose, you could take out another short-term car leasing deal.
Paul Hollick, general manager sales development for car hirer Alphabet, said: “We are seeing significantly increased demand for medium-term vehicle rentals. Many firms’ budgets are tight and their business outlook remains uncertain. Fleet managers are therefore looking for solutions that bridge the gap between the long-term commitment of leasing contracts and the expense of short-term daily rental.
“Leasing is still generally the lowest-cost option in the long term but in the current market customers often want competitively-priced rentals for fixed periods of a few weeks or months. Fleets are taking vehicles on medium term rentals to cover specific needs, rather than taking them on longer contracts in the expectation that they will have work for them in future.”
There are many advantages to short-term car leasing:
- Access to the latest models. With a short-term deal you can update the vehicle you drive, or your fleet, as regularly as every three-12 months.
- Better vehicles. As luxury vehicles tend to hold their value comparatively well, you could find that previously unaffordable vehicles become available to you with short-term car leasing.
- Flexible leases. Cars can be leased on rolling 28 day contracts.
- Fixed costs . Short-term car leasing allows you to budget for the period of each lease knowing exactly what your monthly outgoings will be.
- Maintenance cover. As with long-term leases, maintenance packages can be secured.
- Road Fund Licence. Will usually be incorporated into the agreement.
The downsides to short-term car leasing are the costs. Though it will generally be more cost-effective to take out a short-term car lease than a long-term daily rental, the fact is that most new cars depreciate most rapidly during their first twelve months – the length of a typical short-term car lease. Therefore, payments are unlikely to be as cost-effective as long-term deals.
It’s crucial to shop around to find the best deal. Also make sure you consider all costs – it will be necessary for you to secure your own insurance, and watch out for hidden fees such as additional taxes, early termination charges, administration fees and acquisition fees.
Make sure you do not exceed the mileage limit or cause any unnecessary wear and tear, as the penalties for doing so could be high.
Short-term car leasing is a good stop-gap for motorists while they work out alternative means of transport. It’s also well-suited to companies that have fluctuating needs. For example, if you take on staff for probationary periods you can terminate car agreements on short notice.
Furthermore, it provides freedom to change the type of vehicles in your fleet on a regular basis – so if you need a car for three months, and then require a van, you can alter your fleet accordingly.
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