Keys, cash and cars spread out on a table

Cash, Loan Or Lease? How To Fund Your Fleet Vehicles

Choosing the right vehicle for your business is tough. Then you've got to decide how you're going to pay for it, a judgment that's just as tricky and probably of even greater significance.

By Shell on Aug. 02, 2021

One possibility is to simply stump up the cash. Or you could finance the purchase with a business loan. You could also consider taking out a lease. Each possibility has pros, cons, freedoms, restrictions and potential tax implications that need to be considered, preferably with your trusted registered tax professional. Here are some to think about.


Buying with cash has a certain convenience and simplicity – no shopping for finance, just put the money down and get on with the job. Because you're not entering into a deal with interest charges or other fees, the total outlay is often lower than other finance methods.

You also own the vehicle outright, can claim it as an asset and modify it if required. Not every business, however, has vehicle-sized cash reserves to blow – a considerable amount if you're buying several for a fleet. Even if you do have the cash, you'll be tying it all up in a depreciating asset.

Business loan

These are just like any loan – you front up some cash, your financial institution covers the rest and you pay the balance back in instalments. That's obviously appealing if you can't fork out bulk cash or just want to have less of it tied up in a depreciating asset.

Just like buying with cash, you own the vehicle from the outset and can modify it if required. But you need to decide what business loan you'd prefer – standard or chattel (secured). Chattel loans generally attract lower interest rates but standard loans can be used for other purchases and don't come with the risk of the vehicle being repossessed over a failed payment.

Regardless, you'll be subject to interest charges – though these are typically tax deductible – and other costs, which bump up the total outlay. You'll need to manage the repayments within your cash flow plan and record the loan on your balance sheet, potentially reducing your borrowing capacity.


With this arrangement, the financier buys and owns the vehicle, and you then lease it off them for use. Rather than financing the full purchase price, you're financing part of it and you’ll pay a residual (or balloon payment) at the end of the term. For this reason, recurring repayments are generally cheaper than other finance options, and typically tax-deductible, too. Because you don't own the car, you're not tying your cash up in a depreciating asset and you don't have to record a debt on your balance sheet.

When your term is up, you can either pay the balloon and own the vehicle, refinance the debt, or take out another lease on a new vehicle, turn the old one in and start it all again – good if you upgrade regularly and want minimum hassle. Many leases also include maintenance, registration and fuel costs in the repayments, freeing you from the hassle of managing these aspects of vehicle ownership.

Not owning the vehicle, however, can be limiting. You can't modify it and you might be subject to distance restrictions. You can't claim it as an asset for either borrowing or taxation purposes, either.


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