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Leasing vs. buying: which is best for your fleet goals?

enero 18, 2022

woman using calculator

From business growth objectives to personnel management, there are many important factors to consider when deciding whether to lease or buy your company’s fleet vehicles.

According to Automotive Fleet, 80% of companies with mid-to-large size fleets lease their vehicles, while only 20% exclusively own their vehicles. Why is leasing more popular? Let’s consider the benefits of leasing.

row of cars parked blue sky

Top 3 benefits of leasing

  1. Preserve capital and increase financial cashflow through cost effective fleet leasing 
  2. Reduce your total cost of ownership by on average 10-15% – considering fleet expenses associated with a managed program including maintenance, accident, fuel, and financing  
  3. Upgrade your fleet to newer vehicle models independent from your capital budgeting process  

As you look for efficient ways to improve cashflow and lower your fleet total cost of ownership, consider our lease versus own comparison chart to help you make an informed decision.

Fleet lease versus own analysis: financial and operational comparison

Financing considerations

Leasing

Owning

  • More cashflow flexibility
  • Less cashflow available to use toward higher ROI projects
  • Tax is applied to monthly lease payments (Canada and most US states)
  • Full up-front payment of tax
  • Monthly payment is matched to vehicle’s market depreciation
  • Monthly payment is not typically tied to market depreciation
  • More control over vehicle selection and fleet standardization
  • More variety in fleet vehicles and reduced operational efficiencies
  • Flexible leasing terms and interest rates (float or fixed)
  • Inflexible purchasing terms / interest rates

 

Operational considerations

Leasing

Owning

  • Ability to comply with replacement schedule without interfering with capital budget 
  • Replacement timing can be limited due to company capital expenditure constraints 
  • Prepare only standard fleet budget for approval 
  • Typically follow a capital budgeting process in addition to preparing the standard fleet budget 
  • Cost-effective and easy to upgrade to newer models 
  • Vehicles are cycled less often because of higher up-front investment  
  • Less age-related maintenance expenses 
  • More age-related maintenance expenses 
  • Improved fuel economy
  • Longer lifecycles and typically poorer fuel economy 
  • Short-term leasing allows for more flexibility to meet seasonal business demands
  • Under-utilized vehicles are kept longer and can be more difficult to dispose 
  • Improved asset management using fleet data
  • Less fleet data reporting available
  • Improved brand image through newer vehicles 
  • Old vehicles and poorer company brand image 

Client success stories

There are many companies who have decided to make the transition from buying to leasing. Here are two example success stories: 

  • Consumer Goods client was restricted by annual CAPEX budget for vehicle replacement. By leasing with Element, they were able to preserve cash and replace ¾ of their fleet, reducing their monthly maintenance spend by 58%.  
  • Food & Beverage client wanted to preserve cash to mitigate capital shortfalls. Element consulting identified vehicles fit for a sale leaseback and leveraged value in those owned vehicles to create desired P&L impact and support investment needs. 

Next steps in reducing fleet cost with leased vehicles

Engage Element's Strategic Consulting to help you analyze the financial impact of leasing vs owning. If leasing is the right choice for you, consider a sale leaseback to help ease the transition. Element provides tailored fleet financing options that improve cashflow and deliver cost savings. 

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