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Starting a business is always a costly exercise, as is keeping it running in the black. Therefore, many businesses will try to have as few overheads as possible, meaning they can keep more of their income for their wages instead of for their bills.
For limo hire companies, one of the most expensive parts of the business are the limousines themselves. Most limo hire companies can not afford to buy the vehicles outright and therefore arrange finance and pay off their vehicles over around seven years.
However, in an industry which is so rapidly changing, advancing and developing, so to must the limo hire companies' limousines, therefore, when the limo hire companies are ready to change over their limousines, there are bank loans to cancel and refinance and it is a tedious and lengthy process.
Therefore, many limo hire companies are leasing their limousines over an agreed period of time and simply give the limos back when they want to upgrade. Vehicle leasing has previously been very popular with businesses who lease company cars for their directors and are able to claim all of the lease payments, fuel, servicing and depreciation of the vehicle, as well as being able to trade it in for the new model every few years.
Leasing is a great option for limo hire companies if it is done right. For example, there is the temptation to put a large deposit on the limousine and reduce your monthly repayments, but restrain yourself - there is no point pouring money into a depreciating asset. If it is your own limo hire company use the money to give yourself a holiday, if you are simply running the company, invest the extra money and put down a deposit of only around 20%.
It is also important to look at the length of the leasing contract, the best length is 48 months as by this time the limousine will have about halved in value and you will be ready to upgrade anyway.
Especially in the limo hire industry, the limousines are going to be doing a lot of miles and if you are leasing your limousine through the dealer, you don't have to worry about trying to sell a used limousine with high miles, you just swap it with the dealer for a new one after four years.