One of a company’s largest expenses can be vehicles. Whether a sole trader with a “white van” or a larger business that operates a fleet of vehicles you need to know what your options are and the most cost effective way of operating company vehicles.
Traditionally many companies bought their vehicles and kept them for a certain amount time before renewing them. More recently businesses have turned to contract lease hire as an alternative to owning the vehicles. But what is the difference for companies?
Off Balance Sheet Financing
Leasing vehicles is referred to as “off balance sheet financing”- this means the vehicles are not shown on a company’s balance sheet as either an asset or liability as they would be if purchased with a loan. By keeping vehicles and other equipment off the balance sheet it reduces the debt burden of that company. Businesses only have a certain amount of credit available to them.