Recent reports indicate that business fleets are lengthening their leases. In this post we’ll discuss the factors you should consider when deciding what the best lease length is for your business.
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How Long Are Businesses Leasing their Cars?
According to FleetCheck, businesses are now leasing cars for up to five years, compared to three to four years previously. Meanwhile, average lease lengths for vans have increased from five years to up to eight years.
Why Are Business Fleet Lease Lengths Increasing?
There may be a few explanations as to why business fleet lease lengths are increasing:
- Post lockdown, more people than ever before are working from home. This may mean that fleets are covering fewer miles overall, which can reduce the wear and tear on vehicles. As a result, businesses may not need to renew their fleets as often as they did previously.
- We’re currently seeing high levels of inflation, and certain global events are causing significant disruptions to supply chains. This is driving up the upfront costs of vehicles, which may be encouraging businesses to operate their current fleets for as long as possible.
- As more businesses have, through necessity, increased their lease lengths, they may have discovered that they can do so without compromising on vehicle safety or operational efficiency. This growing realisation may serve to permanently increase the average business fleet lease lengths for all types of vehicles.
Are There Benefits to Longer Leases?
When you lease a vehicle, after you pay an upfront cost, you’ll pay a series of fixed monthly costs for the duration of your lease length. This can make budgeting much easier, as you’ll always know how much your fleet will cost you each month. In times of economic uncertainty, leasing can therefore provide a degree of certainty – and the longer your lease, the longer you can depend on these fixed payments.
Leasing deals often also include servicing, maintenance, and MOTs for the duration of the contract, which can make lease management and financing even more straightforward.
Finally, when you lease a vehicle, you do not need to worry about depreciation. At the end of your leasing contract, you can simply trade your old vehicles for new ones, once again paying just a small upfront price.
What Are The Downsides of Longer Leases?
You will have to return your vehicles are the end of the contract. If you use your vehicles to transport bulky or heavy goods, it can result in a lot of wear and tear. This could result in you incurring additional costs at the end of your contract.
Also, while some leasing deals include service, maintenance, MOTs and repair, the fact remains that the longer you operate a vehicle, the more likely it is that this vehicle will need major maintenance and repairs. Operating vehicles for longer may make it more likely that you’ll be hit with a disruptive breakdown further down the line.
How Does Leasing Affect Insurance
Leasing can also have implications on your commercial motor insurance. For example, it can cause issues with your GAP insurance, when there’s a discrepancy between your claim value and your replacement costs.
Also, if you’re considering a longer lease, you should also think about the length of your commercial motor insurance cover. Taking out a longer policy can give you increased cost certainty, as you’ll be paying fixed premiums for the duration of the policy.
If you’ve got a fleet to insure, has your insurer or your broker discussed the possibility of longer insurance terms? These can bring increased peace of mind and financial certainty. So if this has not been part of the discussion, it may be time to switch brokers.
We can help you find the best insurance cover for your fleet at the most competitive price. Call us on 020 8290 9099 or email us at firstname.lastname@example.org.