postheadericon How to Benefit Your Company Financially by Leasing a Fleet

The question of whether to own or lease a fleet can get complicated. The truth is, there are pros to both ownership and fleet leasing, and the final decision depends on the individual company and its unique situation. Here we’ll take a look at some of the major ways a company can benefit economically from leasing its fleet vehicles.

How to Benefit Your Company Financially by Leasing a Fleet

1 Take advantage of freed up cash. The biggest benefit to fleet vehicle leasing is the cash that becomes available for your business. A significantly smaller upfront investment is required when you decide to lease rather than own your fleet. A well-written lease agreement reduces fleet costs to a monthly operating expense, while keeping credit lines clear and cash on hand to re-invest into the company. The money that would have gone into buying and maintaining a fleet can be used to grow the core business.

How to Benefit Your Company Financially by Leasing a Fleet

2 Choose the right lease. Choose the right lease. A commercial vehicle lease typically comes in one of two categories: Open-End lease or Closed-End lease. The vast majority (about 95%) of organizations in the United States and Canada that lease vehicles through a fleet management company choose to utilize an Open-End structure, because it allows these organizations to manage the vehicle as a corporate asset and more easily deal with issues such as turnover, territory changes, etc. That’s because, unlike Closed-End leases, Open-End leases generally entail no mileage limitations, no penalties for early termination (after a 12-month minimum term) and no penalties for excess wear and tear. At resale, under an Open-End structure, the lessee will generally receive a credit or debit based on the difference between the net sale proceeds and remaining book value; in a Closed-End structure, the lessor typically keeps the resale proceeds if net sale price exceeds remaining book value or eats the cost if sale proceeds are less than remaining book value. Closed-End leasing may be appropriate in certain situations, such as where executive vehicles are provided primarily as a perk and a set monthly price is desired. These vehicles tend to have low mileage, making them less likely to incur penalties, and they typically don’t need to be moved based on circumstances such as turnover or territory realignments. But for most fleets in North America, Open-End leasing is the more appropriate option.

How to Benefit Your Company Financially by Leasing a Fleet

3 Save on administration costs. Companies that own their fleet are responsible for a variety of administrative duties. The titleholder must deal with everything from taxes owed to license renewals. When leasing a fleet, the leasing provider typically handles a variety of fleet management tasks, including paperwork and record keeping, leaving you to concentrate on your core business.

How to Benefit Your Company Financially by Leasing a Fleet

4 Adopt a maintenance plan. Many fleet leasing providers offer programs to ensure the routine maintenance of vehicles, including roadside assistance. These programs are usually covered with a flat monthly fee, allowing you to build the cost into an op-ex budget. And since most leased vehicles fall on the newer side, there are generally fewer maintenance issues and less down time overall.

How to Benefit Your Company Financially by Leasing a Fleet

5 Use technology to reign in costs. Fleet leasing providers typically offer a number of tools to help their clients manage expenses easier. Many offer online fleet management tools to track a fleet’s costs, history and lease terms, along with other necessary information. These tools have made fleet management much less time consuming, resulting in reduced costs. By monitoring expenses more closely and accurately, problems can be identified and dealt with immediately.

How to Benefit Your Company Financially by Leasing a Fleet

6 Take advantage of fuel programs. Many fleet leasing providers offer fuel programs that help control spending at the pump through regular odometer updates and other tools. Fuel programs also often provide preventative maintenance scheduling and fleet cycling, which can help to control fleet costs over the longer term.

How to Benefit Your Company Financially by Leasing a Fleet

7 Consider “value leasing” programs. Simply put, “value leasing” programs provide late-model vehicles that typically look and perform “like new,” yet can save up to $100 per month, per vehicle, depending on the type of vehicle and the terms of the lease. Many of these vehicles even have remaining coverage under the original manufacturer’s warranty.

How to Benefit Your Company Financially by Leasing a Fleet

8 Explore tax benefits. Corporate vehicle leasing can provide significant tax benefits, which vary depending on the type of lease. With an operating lease (the most common type of lease when it comes to commercial enterprises), you treat the lease payments as an expense on the income statement, with the lease obligation footnoted on the balance sheet. In this way, you can gain significant financial tax benefits without the full lease obligation affecting the balance sheet. Alternatively, in a capital lease, you are treated as the owner for tax purposes. By assuming some of the risks of ownership, you can claim depreciation on the asset each year and deduct the interest expense of the fleet lease payments.

How to Benefit Your Company Financially by Leasing a Fleet

9 Boost your company image. A less tangible benefit to commercial vehicle leasing is the ability to keep a more modern, reliable, and better-looking fleet on the road. It can sometimes be overlooked that a company’s fleet is a representation of the company itself, and a fleet consisting of vehicles of varying quality, age, and looks can sometimes send a mixed message. With an updated fleet, drivers benefit from updated technologies, improved safety features, and better fuel economy.

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