Managing your fleet for maximum cost effectiveness can help you achieve greater profitability for your business operation. Understanding the different types of leases available to you in the commercial marketplace can allow you to make the best possible decisions about your fleet investment. Here are some key facts every company should know about Houston commercial vehicle leasing agreements for fleet vehicles.
Open-End and Closed-End Leasing Arrangements
For most businesses, fleet leasing options fall into open-end or closed-end leasing categories:
- Open-end leases are designed to last for a minimum amount of time and are sometimes referred to as finance leases. After the minimum period has expired, the lessee can retain possession of the vehicles for as long or short a time as required. Payments typically start at a higher level and decrease over time as the vehicles depreciate. At the end of the arrangement, vehicles are typically sold and any profits disbursed to the lessee; if the vehicle sells for less than its assigned value, however, the remaining amount due will be collected from the lessee.
- Closed-end fleet leases, by contrast, offer fixed payments and longer time periods. Most closed-end commercial fleet leasing arrangements include limitations on mileage and added fees for miles traveled over the set amount. Any profits or losses at the end of the lease term are the responsibility of the lessor. Wear and tear over the allowable limits, however, can lead to added fees for the company leasing these vehicles from the fleet provider.
Determining which of these leasing arrangements is best for your company depends on a number of factors that vary depending on how you typically use your fleet vehicles.
Choosing the Right Option
Some of the most important factors in your decision between closed-end and open-end corporate fleet leasing arrangements include the following:
- The need for new vehicles on a regular basis
- The amount of wear and tear typically incurred by vehicles in your fleet
- The number of miles traveled by fleet vehicles during an average year
- The financial implications of depreciation for long-term leasing arrangements
- The degree of control exercised over fleet operations by your management team
- The need for stable overhead costs throughout the life of your lease agreement
Companies that can assume a higher degree of risk typically opt for open-ended leasing agreements that offer a greater potential for profit at the end of the term. By taking on the burden of depreciation costs, fleet managers can also avoid being stuck with vehicles that underperform or fail to measure up to their expectations. Closed-end agreements, however, represent a greater commitment on the part of the lessee. If mileage varies widely over the course of multiple years, your company may end up on the hook for overages that could add up to a significant drain on your financial resources.
Calling in the Experts
Working with an established Houston commercial vehicle leasing company can provide added assistance in deciding between a closed-end or open-end arrangement. The experience and expertise offered by these firms can provide you with the in-depth information you need to make the right decision for your business. By outsourcing your fleet management activities to these knowledgeable professionals, you can often reduce overhead costs while achieving the highest possible profitability and productivity in the competitive transportation marketplace.
Glesby Marks offers all-in-one fleet management solutions for businesses in Houston, Denver, Seattle, and Portland. We offer cutting-edge fleet management software to put the control in your hands. Our expert leasing team can also design flexible leasing arrangements tailor-made to suit your needs. Call us toll-free at 800-482-9498 to learn more about our full lineup of fleet management and financing solutions for yourself. At Glesby Marks, we take pride in being the right choice for your fleet.