How to decide? lease or buy a fleet?
The decision to own or lease a fleet is a well-considered choice that should be made by a transport proprietor. The decision usually relies on the finances and requirements thereafter. But to achieve long-term profitability, an adequate plan is needed. Before jumping into the leasing vs buying choice, there are few variables to consider here. And with proper GPS fleet management in place along with your choices, makes your business run smoother.
- Cost: Assess the money you are currently spending on the fleet and estimate how much you are going to spend on the lease and purchase options in the future.
- Flexibility: flexibility is vital to save a lot of cash for tiny companies. Ask yourself if in the future you will also need the same amount and type of cars.
- Maintenance: fleet maintenance is vital and unavoidable in the transportation sector. Analyze if it will be cheaper to lease a car or buy one.
Although leasing and purchasing have their own benefits for distinct transportation companies, making well-informed choices is better to learn about them.
Leasing a Fleet
There are two primary kinds of fleet leasing:
open-ended leasing: leasing the vehicle over a certain period of time and extending it if necessary. But the vehicle becomes yours to sell once the contract period has expired. If the vehicle is sold at a price greater than the estimated price, the leaser will give you a refund. However, the company proprietor will have to pay the leaser the difference if the cars are sold at a reduced price.
Close-ended leasing: In such a type, you can lease the vehicles for a certain amount of time and the fleet must be returned to the leaser once it has expired. This type of lease is also called ‘ walk-away lease ‘ because after the lease period is over, you don’t have anything to commit to.
A tailor-made solution for fleet management and leasing for a multitude of market segments. Our team will guarantee that your fleet goals are met, depending on your company demands.
Operational management ranges from fuel management and infringement management to car purchase and disposal as part of our entire lifetime service. The part of fleet management services, which allows you to concentrate on how to enhance the company instead of being bound up in the operational components of operating a fleet.
Operates for Small Capitals: Monthly repayments for leasing a vehicle are lower than the price of purchasing one directly. This is a significant reason why small business owners are inclined to lease the vehicle with humble beginnings.
Lower maintenance: fleet maintenance and fleet maintenance software is a reasonably costly yet vital component of your company. Usually, the leaser requires care of the maintenance if you lease the vehicles, but there is an advantage from a cost perspective. If the leaser has its own maintenance unit, the cost will be minimal, but if the maintenance is performed by another company, the cost will increase.
Goes off the balance sheet: once the fleet is purchased with a significant capital expense, your debt-to-equity ratio takes on a hit. For lenders and investors, this will badly reflect on your business. For a period of time, leasing the vehicles balances this cost.
Brings flexibility to the fleet: company demands alter from time to time and it’s nice to have flexibility in the fleet they own. Analyze seasonally, geographically and customer-wise trends to know what sort of vehicles are needed for your fleet and their amount, and for the overall fleet management itself.
Opens the door for new cars: no transportation company can continue to update its car to fresh designs. However, you can lease the recent models with extra characteristics, security upgrades, lower maintenance requirements, effective fleet management, and much more fuel economy.
Purchasing a new fleet:
Buying a fleet may look like an enormous economic move if you’re new to the sector, and your capital may not synchronize with your purchasing plans. But vehicle ownership comes with its own set of benefits.
Ultimately, payments end: the best part of purchasing your fleet is that one day, too, payments end in installments. But if you want to offer an upfront payment, you can always switch to more advantageous alternatives for small business financing. The fleet will also be a way for your company to make a strong investment.
Comes without restriction: you are not accountable to anyone from wear and tears to mileage. But remember that if you own the vehicles, maintenance will be charged under your company. Therefore, teach your drivers to take care of the vehicles and also develop a plan to distribute the job equally across all vehicles, making your fleet management a simpler one.
Tax advantages offered: over time, the value of vehicles depreciates and this can effectively assist your company instead of losses. This depreciation can compensate for the offset profit, which will give you tax advantages. The leaser is responsible for leasing the depreciation advantage.
Provides positive equity: your fleet contributes equity to your company, making it favorable equity over the years. Positive equity implies that the quantity your fleet costs to your vehicles is lower than their value, and you can reinvest that distinction back into your business, making the fleet management side of your business a smoother one.
It’s difficult enough to manage your fleet every day. Looking ahead to the future? It seems impossible to do that. But at VAMOSYS Fleet Management, that’s precisely how we do it. By mixing analytics with the industry knowledge of our account executives, we keep an eye on what’s going on and how to make the most of it. Managing a transportation company is a difficult job involving many hard choices and judgments calculated. One of them is to lease or purchase fleet vehicles. While the pros and cons of these two alternatives are described in detail, your choice should be what fits your company best.