New UK car sales, which recently hit a 10-year high, are racing ahead, fuelled by confidence in the economic recovery, as the country’s automotive market continues to thrive – but is buying a car really the best option for agents?
According to the Society of Motor Manufacturers & Traders, private buyer demand for new cars is rising at a rapid pace, but activity drops a few gears when it comes to company fleet acquisitions, which suggests that from the point of company finances, it is not necessarily the best route for agents.
We lease our cars so we don’t have to worry about depreciation and capital can be used for expansion. Yasser Elkaffass, Adam Hayes
“The moment you drive a new car off the forecourt, it loses a big chunk of its value,” said Yasser Elkafass, Director at Adam Hayes estate agents. “However, by leasing our company vehicles, we do not have to worry about car depreciation. What’s more, the fact that we do not have to lay out large sums of money by purchasing cars allows us to save funds which can be invested elsewhere in the business.”
A Citroën DS3 costs £179 +VAT pcm. At a list price of £17,135 it would cost far more on hire purchase. David Plant, Freeborn Citroën
Personal leasing, where you rent the vehicle for two, three or four years then give it back, is growing more popular, partly because it is generally “cheaper to lease a vehicle”, according to David Plant, Business Sales Specialist at Freeborn Citroën.
Plant offered various ‘money saving’ car leasing examples, including the following; “you can lease a [Citroën] DS3 Dstyle and the e-HDi 90hp for as little as £179 plus VAT per month [two-year contract]. Yet, at a list price of £17,135.00, it would cost you far more per month with a large deposit to buy the car on a hire purchase agreement.”
When it comes to car leasing it is not just about the rental price. There are a host of other things that an agent needs to consider before entering into a rental agreement. Will the vehicle fulfil your needs? Will it continue to do this throughout the term of the contract? Will the car portray the image of your company that you aim to project? What annual mileage will the car be doing? How much will the car cost to maintain?
If the agent is running older cars that they own and which incur no monthly financial outlay, the chances are that the vehicles will require money spent on them when they go wrong as there is no warranty on the vehicles and they have to pass an MOT every year.
But if the agent was leasing vehicles on, say, a two year deal, Plant reports that any breakdowns should be covered by the manufacturer warranty and the cars will be returned before any MOT tests are required.
“The company hiring the car is responsible for the servicing of the car and the costs involved unless they add a maintenance and tyre package to the contract hire agreement. That will cover routine servicing and tyres, this gives them a fixed monthly cost for their motoring,” he added. “The hirer is offered the chance to upgrade to cover non manufacturer faults such as wheel changes, punctures, lost keys, lack of fuel and road traffic accidents.”
Aside from potentially saving agents’ money, opting to lease a car, as opposed to buying one, could also present a company with substantial tax benefits.
There are different allowances for the car and the maintenance element of the contract, with agents potentially able to offset up to 100 per cent of the car rental costs against tax, while also claiming back up to 100 per cent of the VAT.
“The entire monthly cost for any maintenance element of the contract can be offset against tax and 100 per cent of the VAT on the maintenance element may be claimed back,” said Plant. “If the car is a ‘pool car’ and only used for business purposes 100 per cent of the VAT on the car rental cost can be claimed back, however if the car is used for private usage then only 50 per cent of the VAT on the car rental costs may be claimed back.”
Plant also pointed out that if the CO2 emissions are below 130g per k/m then 100 per cent of the cars monthly rental cost – pre VAT – can be offset against taxable profits. If the CO2 is above this mark then only 85 per cent of the cars rental cost can be offset.
Perk of the job
Everyone likes a nice perk to their job, especially a smart looking new company car, and sometimes they can be used to give your employees a more comprehensive benefits package.
“Leasing new cars is a relatively cost effective way of ensuring we have good standard vehicles and often a good advantage for new employees who benefit from us having group insurance, breakdown cover and other perks of driving a company vehicle,” said Richard Sullivan, Sales Manager at Eden Harper estate agents.
Aside from salary and benefits, company cars can also be used to incentivise staff by providing a grading structure, from entry level all the way up to top level vehicles, by setting achievable goals that should help to encourage and reward high performing staff.
Waterfords’ staff start with a Mini Cooper, managers rise to an Audi A4 or BMW 3 series, directors get a budget! Darren Walter, Operations Director, Waterfords
“We have a leasing policy which enables us to change the company vehicles every three years,” said Darren Walter, Operations Director at Waterfords.
He continued, “Property Consultants drive Mini Coopers, Sales Managers have BMW 1 Series, Branch Managers have a choice of either an Audi A4 or a BMW 3 Series and Directors have a budget to select a car of their choice.
“We do also give staff the opportunity to opt-out and supply their own vehicle, but many like the ‘all-in’ package that company vehicles provide whereby all tax and servicing are included.”
Increase brand awareness
Aside from helping to make staff feel valued, stylish brand new cars can also be used to enhance a firm’s brand presence within the areas in which they operate.
“Company cars have always been an important part of estate agency, years ago, perhaps even the reason many went into the profession in the first place,” Walter added. “But aside from being a company perk, cars serve an important role in ensuring our members of staff have well maintained reliable vehicles to get them to and from appointments.
“They also provide a further branding opportunity, which although may only seem small, is still an effective method of reaffirming our presence within the local areas we work.”
Put your stamp on it
A car presence is often an indication of an estate agent’s strength and reputation as an established agent in a local area, demonstrating market share, which in turn should help to generate more business by acting as a visible sales tool.
In fact it could be argued that branded company cars which are “in your face”, as Gary Rose, Director at Planet Leasing describes it, are just as important as estate agency boards when it comes to marketing, if not more so, as they will dominate the local streets, providing the agency with maximum exposure.
“Leasing a vehicle offers an extended opportunity to promote a brand,” said Rose. “By not having a branded car you are effectively reducing your chances of attracting fresh business.”
While branding on a car must contain relevant information, such the company’s name, website address and potentially telephone number, it is “particularly important to think about the logo and about the colour” ensuring that it “fits in with your wider brand”, according to Rose.
Agents should regularly pay close attention to the branding on their cars, ensuring that they look smart and professional, while portraying all the right messages.
When it comes to using cars to help win greater local market share and ensure that they are not overlooked by prospective customers, Rose advises agents to use “fully wrapped” branding on their cars, as opposed to “partial branding”.
He added, “A car can be partially branded with self-adhesive vinyl lettering which is easily removable, rather have the logo painted onto the car, with costs starting from just around £200. But I would recommend fully wrapped branding, which covers the majority of the car, as this offers maximum impact, with costs for this latter service starting from in the region of £800. However, the cost of branding a car could potentially be included within the price of leasing the vehicle.”
Types of cars
There is a wide range of cars to choose from when leasing a vehicle, but what sort of cars should an agent actually choose?
“While the cars should reflect the company’s wider image, I would advise that agents opt for a stylish car that does not look too flash so as not to give the impression that they are earning too much money,” Rose added. “It’s also important to opt for a car that is economical and easy to park.”
He highlights the choice of vehicles that his firm provide for Belvoir as being good examples of the sort of cars that agents should consider adopting; “Smart Car, Mini Cooper, Citroën C1 as well as the Audi A1 and A3 are all very popular.”
While there are many advantages to hiring a car over buying one, there are a few potential downsides to consider:
- It can be costly to exit a contract hire agreement should you decide that you have chosen the wrong car or inadequate contract mileage.
- Just as if you were renting a property, you will be charged for repairs and damages if you return the car in a condition that is considered beyond ‘fair wear and tear’.
These charges can include replacing lost or broken keys, dents, scratches and you will also be charged for missing or lost service history, none road worthy tyres and scuffed wheels.
Words of wisdom
Despite some of the potential pitfalls, we leave you with the words of John Paul Getty, the oil tycoon, who once remarked: “If it appreciates, buy it. If it depreciates, lease it.”
- Freeborn Citroën www.freeborngroup.co.uk
- Planet Leasing www.planet-leasing.com
- Eden Harper www.edenharper.com
- Waterfords www.waterfords.co.uk
- Adam Hayes www.adam-hayes.co.uk