How you choose to finance any vehicles you use for your business can be a minefield.

But amidst all the talk of the various options available to you, their respective features, and the attempts by commission-hungry sales staff to upsell, the essential, basic features of the options on offer to you might easily get drowned out.

For the purposes of this feature, we’re looking purely at the option of leasing.

Straight off, this is seen by many as an inferior choice, as despite making monthly payments towards its cost, you don’t have the chance to take full ownership of the vehicle.

But there are many other benefits, which are either built in, or can be bolted onto, a leasing agreement, which can offer valuable assurances for a small or medium-sized business, and especially one which depends on having use of the vehicle – or a short-term replacement – for its effective operation.

As ever though, with any form of contract, it’s what is contained in the small-print of your leasing agreement which will determine whether the deal is right for you and your business.

You should bear in mind that a lease is simply a form of long-term hire arrangement. It means, essentially, that the vehicle remains the property of someone else throughout your contract. However, it does mean that they may agree to build into your deal some form of maintenance contract – this, after all, is in the leasing company’s interests, as it can then be sure that the vehicle will be properly looked-after by the person or company to whom it’s leased.

From your perspective as an SME owner, such an agreement means that you have certainty over the outgoings for the lease and regular maintenance of the vehicle all the time it’s yours to use. So there are no nasty shocks every year or so when it’s time for it to be serviced.

A lease agreement usually requires a much smaller up-front payment than if you were purchasing the vehicle outright. A typical first payment is the equivalent of three of your regular monthly instalments, but this can vary, and if you can afford a higher initial payment, this could help reduce your outgoings.

In return for the right to use the van on a long-term basis, the lease company will impose a number of conditions on your use of the vehicle, which will usually cover

• The length of the lease period
• A stipulation as to the total mileage you can cover during your lease term
• That the van is serviced by an authorised repairer for that manufacturer, at the manufacturer’s recommended intervals, and
• That the van is kept, or returned to, a satisfactory condition at the end of the lease.

If you think about it logically, the main aim of each of these provisions is so that the owner of the vehicle – whether that’s the manufacturer or a separate leasing company – can be sure that their own interests, and financial stake in the vehicle, are protected throughout the time when you are using it.

There are also two main types of lease agreement. The first is the straightforward lease, whereby you agree what’s in effect a long-term hire of the vehicle, then, subject to you abiding by all the terms of the lease as outlined above, you can simply hand the vehicle back at the end of the term, and have nothing further to pay.

If you wish, you can then start another lease agreement. This is a great way of keeping up with vehicle technology, as you can change your older vehicle for a newer one, possibly with much-improved safety and comfort features, every couple of years, for possibly just a little extra outlay each month.

While you are leasing a vehicle, a large part of the costs of the actual lease and the vehicle’s running costs, when used in connection with your business, can of course be offset against your business’s profits for tax purposes.

But you have the drawback that the vehicle is not an asset of the business, so you do not have the chance to sell it on if you need to realise some cash, or the business’s needs change.

Recent figures from the Society of Motor Manufacturers and Traders showed that up to 80 per cent of all vehicles are now bought and run under some kind of lease or lease purchase agreement.

So if you choose to go down this road for your business, you’re sure to be in good company, as the businesses which own the vehicles and lease them realise they are meeting a growing demand, and so are keen to come up with ever more flexible and affordable ways of businesses being able to get and run the transport fleets which best suit their needs.