Would it be better to buy or lease a car?
Take a look at the following considerations when deciding which car is going to work best for your business.
One of the first questions you may ask yourself when you have qualified as a driving instructor is whether it’s better to own or lease a car for your business. After all, as a driving instructor, your car is your shop window.
So, do you choose to buy your own car and get dual controls fitted for your business? Or do you lease a car? Alternatively, if you’re not going fully independent a franchise is always another option.
Did you know? With an AA Solo Franchise vehicle, you can use a high-spec car for 24 months, with insurance, breakdown cover, maintenance and replacement vehicle all rolled up into one weekly payment. Find out more here: https://www.theaa.com/driving-school/driving-instructor-franchise .
Consider the costs
Buying a car outright will incur a higher outright cost, unless you choose a finance option (more on this below).
This is particularly the case for driving instructors, as you’ll want something relatively new – partly because it should mean spending less on maintenance and repair costs, but also because you’ll want something that’ll appeal to potential pupils.
There are also additional costs to consider, such as car insurance, vehicle excise duty (VED – sometimes known as car tax or road tax), and ongoing maintenance, servicing and MOT costs. And while insurance and VED can be broken down into monthly payments, there’s undoubtedly a lot to shell out.
Leasing, on the other hand, involves monthly payments. For many, this will be the most affordable option in the first instance. There’s usually an upfront payment to be made too, although these don’t usually break the bank. That said, you may be able to reduce your monthly payments by stumping up more upfront.
In either case, it’s important to do your sums. If you’re able to do so, it’s worth considering which will cost you less in the long run. Because – even though buying a car outright is expensive – it may well prove more cost-effective than leasing over the course of its lifetime, because ongoing costs should drop.
What are the car finance options?
Of course, buying a car doesn’t have to mean covering it all in one payment. There are also car financing options to consider. The main ones are:
- Hire purchase (HP). With a hire purchase agreement, you make equal payments throughout the lifetime of your agreement. At the end of the term, you own the vehicle outright.
- Personal contract purchase (PCP). With PCP, you usually pay a lower monthly payment than with hire purchase. At the end of the term, you have the option of making a final large payment (otherwise known as a balloon payment) to own the car outright if you want to.
- Unsecured loan. You could also consider taking out a personal loan to finance your vehicle. In this instance, you own it outright straight away.
While car finance is a useful way to spread your costs, you should never take out a loan or finance if you can’t afford the repayments.
Also, while car finance can often bring a vehicle closer to reach in the first instance, it’s always worth finding out how much you pay over the term of the agreement, and compare this with the cost of buying a car outright.
Buying a car: pros and cons
Now we’ll weigh up the pros and cons of buying a private vehicle for your business.
Buying a car: Advantages
First of all, if you value ownership, buying may be more appropriate. When you buy a car, you’re not driving a car which belongs to another company – you’re driving your own.
In some senses, buying gives you more flexibility – especially when it comes to branding your vehicle. Here you’ll have the freedom to customise your car, and truly make it your own.
Buying a car: Disadvantages
Apart from the high upfront cost, another big disadvantage of owning a car is that it won’t keep its value. Cars almost always depreciate over time. And buying a car means you’ll be responsible for its resale value.
Another disadvantage of buying is that you need to make contingency plans in the event that your car’s off-road. If you need to get it repaired after a collision or breakdown can have knock-on effects for your pupils.
Leasing a car: pros and cons
So how does leasing a car stack up? Here are the pros and cons.
Leasing a car: Advantages
Leasing a car provides flexibility, as you can usually choose to upgrade or change the vehicle at the end of the lease term. If you prefer driving newer models with the latest features and technology, leasing might be a better decision. Equally, you may feel that your pupils will benefit from driving an up-to-date car.
This route may also make environmentally friendly vehicles more accessible, as they tend to be expensive to buy upfront. Hybrid and electric vehicles (EVs) are not only better for the environment, but you’re less likely to get charged from driving them through clean-air and low-emission zones, which are becoming more prevalent in cities across the UK.
Leasing also eliminates concerns about depreciation, since you return the vehicle at the end of the lease term. It can come with other stings though, which we’ll consider in a moment.
It also means there are certain ongoing costs you don’t need to worry about. Always check the package details before putting pen to paper though. All cars leased via The AA come with road tax and breakdown cover included, with an optional maintenance, servicing and repair package.
Leasing a car for business use may also have certain tax benefits. For example, if you use the car solely for business purposes, its hire or rental cost may be 100% tax deductible. It’s always worth doing your homework though. For example, if the car’s CO2 emissions are more than 50g/km, you need to disallow 15% of these costs.
Leasing a car: Disadvantages
Unless you’re given the option to buy at the end of the term, you won’t own the leased vehicle, so it won’t ever be your asset.
Bear in mind that leased vehicles are also likely to be subject to terms such as a mileage limit. If you exceed this, it could mean you have to pay penalties. It’s really important to work out what mileage you think you’ll be clocking up – both for personal and business use.
Also, there are still ongoing costs you may need to pay. For example, leased cars often don’t come with car insurance included. And some may not have maintenance and servicing packages. Always be sure to check the fine print before you commit.
The third option: Joining an AA Driving School franchise
The AA Solo Franchise provides you with a high-spec, unbranded car for 24 months and as part of a weekly fee, you would receive:
- Comprehensive insurance
- Maintenance, service and repairs
- Courtesy car
- Breakdown cover
And at the end of your contract, you can trade your vehicle in for a brand-new one. It’s a no-fuss option, which also affords you the independence of establishing your own brand. You can find out more by requesting an info pack.
Alternatively, by joining the AA Driving School on an all-inclusive franchise, you’ll have the backing of one of the UK’s most iconic brands.
For a weekly fee, you’ll have the choice of a new, high spec, branded car. You’ll receive dedicated customer support, comprehensive car services and great marketing activity to help you grow your business. All with the complete flexibility to set your own prices, locations and hours. You would receive:
- Uncapped pupil supply
- Comprehensive car insurance
- Maintenance, service and repairs
- Courtesy car
- Breakdown cover
- Dedicated business and fleet support
- Pupil booking and diary system
- AA membership
Find out more about whether you should join the AA franchise today.