It’s a nagging question for small business owners: Should you purchase a company vehicle or rent when the occasion arises? The answer is not as cut and dry as you’d expect and choosing incorrectly can mean thousands of pounds wasted in unnecessary fees or left on the table from missed capacity. It all depends on usage frequency, financial situation, and how much of that transport capacity gets utilized each month.

The problem is that many businesses assume they’ll use a vehicle more than they actually do. A person starts a business, thinks they’ll be making deliveries three times a week, purchases a van, and then quickly realizes they’re only driving it twice a month. Now, they’ve made the improper decision to have to pay for insurance costs, MOT payments, and maintenance of a depreciating asset that’s parked in the car park for twenty-five days out of thirty.

The Hidden Costs of Owning a Vehicle

People do not factor in the additional expenses of owning a commercial vehicle either. They fail to realize that once one buys a commercial vehicle, it’s a purchase PLUS expenses that all go toward making it a vehicle for business use – and those expenses get pretty hefty.

For example, insurance for commercial vehicles is significantly higher than personal insurance for much younger companies without history for claims. Then there’s road tax, servicing (in case any motor accidents occur), necessary MOT tests each year, and repairs if something goes wrong with the van.

People also forget about how much initial depreciation occurs when buying a vehicle. A used van can lose up to 40% of value in the first year alone – this occurs even faster than personal vehicles for all sorts of reasons. That’s thousands down the drain regardless of the van sitting in the parking lot gathering dust or actively being utilized day-in and day-out.

The issue with ownership is that it comes down to people feeling like they have control over their operations. When people think they have a van/truck/etc. on hand, they’re readily available for whatever job may come their way. This isn’t true. That readiness is costing them money every single day when they’re not using the vehicle as well as when they do.

When It Makes Sense to Rent a Vehicle

For businesses making occasional deliveries (or collections), renting makes more sense. The bottom line suggests that typical businesses are better off renting than paying the fees associated with ownership even if ownership makes sense to certain business owners on a psychological level. If one needs a van two or fewer times per week, averaging out the costs – especially with additional expenses attached to ownership – so that people only pay for what they need logically leads to significantly lower fees through rental.

Furthermore, services like hirefleet allow people to rent on as-needed bases instead of forcing them into long-term ownership. For this reason, people paying for what they need end up better off because if they realize they only need the van for four days in March, they only pay for those days – thus saving on unnecessary maintenance or insurance during times where it wouldn’t even be used.

In addition, size matters when renting. One week a small van might suffice; the next week, something larger is needed depending on what needs transporting. People aren’t able to rent multiple size capacities through ownership unless they’re able to afford several vans/trucks/etc – which many small businesses cannot do – but the rental process allows each ability to get what one needs at all times.

When Renters Become Owners

Of course there are instances where buying clearly makes sense. If you’re going to use it every day, you might as well own it, right? People who need commercial vans or trucks for five or more days per week are better off owning their vehicles. Thus, the average breakeven point is somewhere between three to four days per week where ownership makes more sense – and this differs from vehicle type to rental fee type.

Branding plays an important role as well – livery on company vehicles helps brand and promote from the road – which rental vans cannot do. Businesses who are constantly out on the road (plumbers, electricians with large tools and needs; delivery services) rarely get job tickets without identifying vehicles parked near someone’s home or office site.

Then there’s reliability – owned vehicles can be outfitted and maintained how a business owner wants; necessary equipment can be secured and people can trust they’ll always have one available at a certain size without wasting time looking for rental options during peak seasons where demand is high – but with rentals, availability might not be guaranteed and exact details might be lost on what small changes make or break certain jobs.

Finding a Happy Medium

Some go right down the middle – they own one vehicle for consistent daily operations – and rent an additional vehicle or two that satisfies their off-demand levels when necessary. They essentially know their baseline capacities – but need an excess when certain busy seasons arise or when particular jobs require different types of vehicles.

For example, a catering company might own a small van for daily ingredient pickups but might need to rent a larger vehicle for grand events from time to time; similarly, a furniture maker may have a medium-sized van for local deliveries but will need to rent a Luton for long-distance jobs from customers. This way they save overall from excess rental fees but still retain branding and consistency through availability.

Unfortunately, managing both systems requires time management that some people may feel isn’t worth it – someone needs to book and secure rentals versus having their own day-to-day option versus needing to swap out vehicles when busy seasons arise; if someone is working by themselves or has a small team this added pressure could outweigh stress as opposed to profit.

Numbers Don’t Lie: An Empirical Approach to Decision Making

Ultimately, it’s about tracking real needs and deciding what’s relevant first before commiting because business owners typically spend time pretending how often they’ll actually use these vehicles instead of factoring in reality. Before purchasing any vehicle or renting after ownership takes place, track how often daily operations require vehicles over the course of at least three months – how many days does transport actually need to occur? What size is appropriate? Will seasonality change anything down the line?

Most people guess based upon feelings of ideal versus worst-case scenarios; the problem occurs is that more often than not they overexert their buying capabilities and buy into extra capacity more often than not that’s sat idling most of time.

Factor in all ownership costs – from purchase price (or finance acquisition) to insurance/extras involved with road taxes, necessary MOT services, repairs needed, fuel (all money spent) and depreciation – as well as additional rental costs (typically low due to what people actually will use). Compare them – with each side seemingly coming out winning – and surprised to see who wins does not make sense.

Renting versus Owning: Practical Taxes and Accounting Advice

From an accounting standpoint it’s important to note how tax purposes apply differently from your auditor’s perspective. Rental cars are fully deductible as business expenses during the year. Ownership will require capital allowances over time – meaning cash flow/tax implications differ.

For example, renting comes with simpler accounting – a clear cut operational expense with no depreciation calculations aside from book keeping – but owned vehicles become business worthies even if depreciating over time – which correlates to financing and resale values up ahead. There are assessments lenders make from balance sheets that are predicated upon valuables that rented expenses do NOT support.

Whether you Rent or Own: The Bottom Line

There’s no universal right answer – and that’s the real crux. Assess what’s legitimate based upon patterns that reflect what’s reasonable over finances and personal preference.

Instead track legitimate real needs – compare scenarios both qualitatively and financially and factor opportunity costs versus them; what’s hidden versus what’s tangible. As your business grows or downsizes in the future how often should this occur – and what’s easier – flexible access or control?

Jane