Electric Car Fleet Leasing Vs. Buying

With the focus on sustainability becoming more of a global concern, companies are considering electric car fleets as a way of lowering both their carbon footprint and ongoing vehicle-associated costs. This therefore begs one important question: should businesses lease or buy these cars? 

This choice has a lot of implications for the company's finances, operational flexibility, and environmental footprint. Making an intelligent decision based on your needs that meets your specific requirements can be achieved by critically examining the advantages and disadvantages of each option.

Upfront Costs

One critical point to discuss while deciding between buying or leasing an EV is the initial investment involved.

Buying

Owning an electric vehicle entails heavy upfront investments in every car within the fleet. This represents a huge financial commitment for small or medium-sized businesses with limited resources. Such firms may need to resort to conventional loans or financing options in order to raise money for purchases, thereby putting added pressure on their cash flow as well as their capital reserves.

Leasing

On the other hand, leasing an EV usually involves a smaller initial deposit plus the first month’s lease payment. The reduced start-up expenses offered by leasing can be advantageous to any firm aiming to minimise its upfront expenditure while maintaining some financial flexibility for other operational requirements. 

Taxes

When making the decision to lease versus buy, tax implications have a great influence.

Buying

Buyers can avail of 100% first-year capital allowances on the entire cost of the car, which means that the entire cost of the vehicle is deducted from taxable profits in the year of purchase. However, EVs become subject to regular vehicle taxes like VED and company car tax based on the vehicle’s P11D value if used as a company car.

Leasing

When leasing, you cannot claim capital allowances because you don't own the asset. However, all rental charges for this lease are completely tax-deductible. Moreover, some companies like loveelectric.cars offer salary sacrifice schemes. With this scheme, employees can lease an electric vehicle through their employer by having a small portion of their salary sacrificed, thus further saving on taxes.

Depreciation

To make a sound decision between buying and leasing EVs, you also must be aware of the role that depreciation plays in each option.

Buying

Due to rapid advances in battery technology and incentives that affect resale values, EVs generally experience higher initial depreciation rates than traditional gasoline vehicles. When buying a vehicle upfront, the owner has to bear the entire depreciation cost.

Leasing

On the other hand, when you lease an EV, you are renting it for a specific time period (two to four years). Therefore, you don’t take full responsibility for the entire depreciation expense since it’s already factored into your lease payments.

At the end of the lease term, you give back the car to the leasing company, and you don’t have to think about resale value. In this case, you will be protected from any decline in the value.

Maintenance Costs

When deciding between buying or leasing EVs, responsibility for maintenance and repair costs is also an essential consideration.

Buying

Organisations that buy electric fleets upfront are fully and solely responsible for maintenance and repair costs. Although EVs generally require less routine maintenance than their gasoline counterparts, battery replacements and other repairs can still be costly. This should be considered when calculating long-term ownership costs.

Leasing

Some lease agreements may include regular maintenance charges in the monthly fee. However, this is not always the case, and businesses should carefully review the lease terms to understand what maintenance is covered. Unexpected repairs may still be the responsibility of the lessee. Thus, understanding all the details about what the lessor covers in its scope of maintenance coverage can help you avoid some unanticipated financial holes in your pocket.

Customisation

The ability to customise vehicles to specific needs varies between leasing and buying.

Buying

Companies that buy electric fleets have greater flexibility to customise the vehicles to their specific requirements. For example, this may entail putting company logos, using specialised equipment, or choosing unique characteristics for different types of cars within the fleet. 

Leasing

Leasing offers limited customisation options. The rental agreement may restrict any alterations made to the vehicle and require approval from the owner. This could be disadvantageous if customisation is necessary to meet particular operational and branding specifications.

The Verdict

This decision to choose between leasing or buying your EV fleet is complex, necessitating a careful examination of a number of factors. While leasing gives you lower upfront costs and helps you save on maintenance expenses and taxes, buying gives you full control over customisation and upgrades. From the points we looked at above, there are a few more advantages to leasing, compared with buying. But, the choice should be down to what your business uniquely needs.