Statistics Canada recently released an overview of the commercial leasing landscape in Canada, noting a rise in the number of companies that are leasing assets, vehicles in particular. A major reason, they cite, for the popularity of asset leasing is that it offers greater access at a lower cost – something most businesses already knew.
But that can’t be the whole picture. Company fleet leasing in Toronto has seen a notable up tick recently, and it is because of a confluence of factors. Short of just financial benefits (which this article will touch on briefly below), shifting attitudes, sensible approaches to cash flow and increasing environmental concerns have also stoked the demand for leases.Â
Why are more Toronto companies opting to lease their fleet vehicles? Let’s boil it down to four key reasons.
Tax Advantages
Companies are able to deduct a portion of lease payments commensurate with the vehicle’s business use. For most fleet vehicles, like transport vans, cargo trucks, etc., that portion is 100%, since the vehicle is used strictly for business purposes. Employee vehicles have to separate commute times when calculating the portion of use for business, but nevertheless many employee cars can still end up deducting 60-75% of lease payments from their taxes. In any case, it represents a crucial benefit of leasing.
Shifting Attitudes Toward Ownership
Less tangible than tax advantages, you still cannot discount the effect of shifting cultural attitudes on broad scale business decision-making. Services like Netflix and Spotify are incredibly popular, and the rate of home ownership in the city is shrinking – these might seem like two separate anecdotes, but together they paint a portrait of a millennial generation less concerned with ownership, and more concerned with use and access. As more millennials occupy managerial and even c-suite positions, expect to see a leasing – especially vehicle leasing – continue to rise.
Embracing New Technology and Fuel Economy
Leasing means trading in your car every 2-4 years, as opposed to the typical 8-year period of ownership. A company that leases, therefore, is taking better, more frequent advantage of improvements in safety technology and fuel economy. Don’t think that has gone unnoticed. Particularly amid companies that want to project a green image, leasing the latest electric car is far preferable to owning an old gas-fuelled one.
Better Cash Flow, Better Car
Finally, the fact of the matter for many companies is that ownership isn’t as important as saving money and freeing up cash flow. Leases carry a lower monthly cost than loan payments, so it makes sense for companies looking to manage cash flow to lease their vehicles. The monthly cost of leases is so much lower in fact that many businesses opt to upgrade to a vehicle they wouldn’t normally be able to afford through traditional financing – and they still end up paying less monthly. Put that way, the trend toward leasing starts to make more sense.
Have you noticed a shift toward commercial leasing recently, either of equipment or fleet vehicles? If so, you aren’t alone. With the shifting attitudes of decision makers, and an increasingly sensible bottom-line approach to accessing business assets, expect to see leasing continue impacting businesses.
