Why vehicle ownership costs more to new businesses and what can they do about it?
By SMAS INDIA
17 February, 2020
Transport is an indispensable facet of every active business, big or small. Vehicles, hence, are a utility that stand as a necessity. But, operating a fleet of vehicles also comes with costs- both fixed and variable. For new businesses, especially startups, cost is a crucial factor for growth and a fleet only adds to their burden. In this post, we will tell you about why vehicle ownership costs more to new businesses and what they can do about it.
Let us get started!
Why Vehicle Ownership Costs More to New Businesses?
Startups and newly established businesses have their own transportation needs- right from moving employees to ferrying goods. However, the enterprises tied to a limited funding source or with a limited budget might face challenges if they decide to purchase a fleet of their own. The reasons are listed below.
Upfront Down Payment for Vehicles
If a new business decides to purchase a fleet of its own, it will either pay for it entirely or get a business loan to finance the procurement. At this point, a business must keep in mind that they are making a ‘cash-heavy’ investment in a depreciating asset. Not only will this action rob them off precious funds (that can be used to hire additional workforce, make parallel investments, etc.), but also add a liability factor on them (if the vehicles have been financed by bank). The bottomline is, for new businesses, the decision to purchase a fleet is a pressure on their internal monetary resources.
Vehicles are Depreciating Assets
If an enterprise owns a fleet, it can straightaway be marked-off as a depreciating asset. Vehicles, as soon as they move out of the showroom, lose their value and continue to do so unless sold. For a new business that is looking to minimize its liabilities and increase its profits, fleet ownership is usually advised against.
Additional Manpower & Staffing for Fleet Management
Every department, operation and process within a business demands skilled and adequate manpower. A fleet of vehicles is no different. In fact, it requires more skilled people in place that adds up to monthly overhead costs in terms of salary. In addition to this, infrastructural costs need to be factored in too. Covered parking space, accounting software for cost tracking, security measures, etc. can quickly shoot the monthly overhead costs for a new business.
Maintenance & Liability Concerns
Any vehicle, be it a truck, van, SUV, hatchback or a sedan, requires its fair share of maintenance and adequate care for reliable functioning. During a vehicle’s lifetime, a major chunk of the incurred costs is accounted by the monthly maintenance costs. This includes regular top-up service, major overhauls, accidental repairs and spare parts.
As far as liability is concerned, it is another factor that enterprises need to keep in mind. Road accidents, fines, etc. are to be borne by the owner of the vehicle (in this case it is the company). Any major mishap might also lead to a lawsuit which is another big problem for the company’s image and finances.
What can the Businesses do about simplifying their transport needs then?
The answer is very simple- Hire a vehicle leasing service!
Before you critically evaluate the solution, hear out the benefits of hiring a vehicle leasing company as mentioned-below;
Pay only for the usage and save big bucks!
With a reliable vehicle leasing company like SMAS India, businesses only pay for the usage of the vehicles. Be it ferrying employees to and fro or transporting bulk commercial goods via trucks, a company can meet all its transportation requirements at one place.
Thus, hiring a vehicle leasing service will save a company big bucks on vehicle purchase costs, staffing and manpower costs, monthly maintenance costs and more importantly from the potential liabilities.
Enhanced Employee Experience
Vehicle leasing companies are not just a highly cost-effective solution for businesses, but also a pro-employee experience factor. Employees get their ferrying needs solved on time, with reliable service and benefit of punctuality. This is often perceived as a perk and employees tend to stay longer in companies with butter-smooth transportation.
For new businesses with strict budgets and tight investment control, a vehicle leasing company is the best option to sort out their transportation needs. If you are one of them, try out SMAS India’s services and see the inherent benefits of leasing vehicles yourself!