With a business vehicle of your own, there are several benefits. You can drive it whenever you want and for whatever purpose you desire. It’s also ideal for business owners who need to run for supplies and travel. However, owning a van or a lorry may not be an option for everyone.
As an alternative, many businesses turn to commercial vehicle leasing in Singapore. It’s an ideal solution for start-up companies with little or no prior credit history and those who want to avoid the depreciation fees and commitments of owning a vehicle altogether.
When you lease a car, you agree to use the vehicle for a set amount of miles or months. As though renting an apartment rather than purchasing a home.
What is commercial vehicle leasing?
It’s like signing up for a long-term rental agreement for a vehicle. In contrast to financing an automobile purchase to purchase it eventually, leasing is a long-term rent. Like leasing a commercial van in Singapore, you will need to make a monthly payment and sign a contract for a specified period of months.
Rather than repaying a mortgage and establishing equity, you are paying for the car’s predicted loss worth over the lease term.
What should you know before commercial vehicle leasing?
An important consideration when considering car leasing options is how many miles you typically travel yearly. For example, if you are paying for lorry leasing in Singapore, you agree that you will not exceed the agreed-upon mileage restriction. Throughout the contract’s duration, they will calculate the agreed-upon maximum annual mileage. The rental company will charge you a fee for every mile you drive beyond the limit.
You can deduct lease fees and driving expenses during the leasing time, but only if you use the vehicle primarily for work. Over the agreed-upon number of miles, your organisation is accountable. Additional charges may be incurred if “excess wear and tear,” as described in the lease agreement.
1. Decide between open-end vs closed-end
If the residual value turns out to be lower than the anticipated resale value, you will be responsible for the difference in an open-end. On the other hand, closed-end leases require you to pay just the difference between the agreed-upon mileage and any additional damages.
2. Approximation of mileage
Before signing a commercial van lease in Singapore, figure out how often you’ll drive the automobile each year. A standard lease would have a yearly mileage cap of 12,000 miles, but if you anticipate moving more, it’s worth paying a premium for the extra miles if you need to use it.
3. Return on investment
When a lease term expires, a vehicle’s residual value is its current market worth. Commercial vehicle leasing in Singapore agreements come with a residual percentage to help you figure out how much your car is worth when your lease is up.
After 36 months of leasing, it’s unlikely that a vehicle’s residual value will be more than half of its MSRP. It’s ideal if the residual is between 55 and 65 percent of the MSRP.
4. Duration
To put it another way, the term “short term” refers to a lease that lasts a year or more than a year; a “long term” lease lasts for three to four years, depending on your needs. In terms of costs, both choices should be less expensive than buying a car.
What to avoid when leasing a commercial vehicle?
1. Overspending in the beginning
Even while car dealerships promote low monthly lease payments for new automobiles, paying everything up front may be necessary to achieve those low monthly lease rates.
Even when buying or leasing a second hand car in Singapore, your insurance carrier might compensate your leasing business if you were involved in an accident or theft during the first few months. Still, the cash you paid upfront won’t come back.
2. Failure to purchase GAP insurance
Theft or accident totalling your rented car? GAP Insurance has you covered. For most people, the value of their vehicle will be less than what an insurance provider will pay out if it gets damaged or stolen.
Regarding commercial vehicle leasing in Singapore, GAP pays for the extra if you have insurance. If not, you’ll have to come up with the cash yourself.
3. Failing to keep up with routine maintenance
To keep your leased car in good condition, you may feel tempted to delay servicing and ignore minor scratches and scrapes. However, making such a blunder might be damaging. Even for lorry leasing in Singapore, post-lease inspection is typical.
It’s a must to keep your automobile well-maintained and repair even minor dings and dents to avoid paying hefty fines.
4. Leasing late models
Although a second hand car in Singapore may help your business, the model you choose still matters. Keeping depreciation to a minimum is a priority because it is the main cost of leasing.
The only exception is if the car is in high demand and you cannot reach an agreement on a reasonable price. Give it at least two or three months before renting to avoid running out of stock.
5. Risking early lease termination
Car leasing is like renting a house in that you usually sign a long-term contract and agree to pay fines if you don’t keep up your end of things. Suppose you are to rent a commercial van in Singapore and are unable to make the payments. To avoid damaging your credit rating, contact the lending business immediately.
The leasing company will charge you a cancellation fee if you return the vehicle. In most circumstances, this will be 50% of the remaining rentals, but this can vary according to the financial institution.
When doing commercial vehicle leasing in Singapore, make sure you can stick to the terms of the agreement and keep your end of the bargain.
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