Deciding between commercial vehicle leasing or purchasing can be a difficult decision for many fleet managers. To find the best solution for your fleet, you will need to consider the costs of leasing compared to purchasing vehicles for your business. While it may seem like the more attractive option to purchase, leasing can actually offer many cost savings and advantages. This is especially true for larger fleets with 25 or more commercial vehicles
Commercial Vehicle Leasing Frees Cash Flow
One of the more obvious advantages of commercial vehicle leasing is that your business doesn’t have to sink a large down payment into a new fleet. When you purchase fleet vehicles, there are two options. The first is that you can purchase them outright in cash. In most cases, businesses will provide a hefty down payment and finance the vehicles. Financing your commercial vehicles generally means higher monthly payments compared to leasing. Therefore, leasing your fleet can help free cash flow now, as well as each month while you use your vehicles. Many companies end up having to make sacrifices due to the large up-front costs associated with purchasing fleet vehicles.
A common argument for purchasing fleet vehicles is that you can put your vehicles on the balance sheet as assets. This is true and may offer benefits for your company. However, financing commercial vehicles also means increasing your debt to equity ratio. This can make your company less attractive to investors and lenders. Therefore, it’s important to consider this ratio when deciding whether to purchase or lease your fleet.
However, even if your company has plenty of cash to fully cover the costs of your fleet vehicles, consider this: is there somewhere else that you could invest that money? In many cases, even cash-rich fleets lease vehicles instead of purchase them. This is because there are many other areas where they can use the funds that produce a higher ROI. Commercial vehicle leasing allows you to use the fleet vehicles you need for your operations and put your capital toward more profitable investments.
Subtle Savings with Commercial Vehicle Leasing Options
While many fleet managers realize that commercial vehicle leasing keeps cash flow positive for the company, there are also many other savings that add up over time. These hidden savings also work toward making your fleet more profitable and better able to expand.
Take Advantage of Optimal Lifecycles
First, there are advantages to using vehicles when they’re new and upgrading when they’re not. Naturally, newer vehicles are generally more attractive. They come with the latest technology, some of which may offer time-saving opportunities for your drivers. However, there is also a clear economic benefit for only keeping your vehicles for a short period of time during an operating lease.
The older vehicles get, the higher fuel and maintenance costs rise. Rather than either eating those costs or facing the lengthy process of remarketing and replacing your fleet vehicles, commercial vehicle leasing allows you to use your vehicles during their economic lifecycle. This is a more cost-effective way to use your commercial vehicles before they start to become worn.
Another great perk is that newer vehicles generally offer lower fuel consumption compared to older models. Once your current vehicles become obsolete, you can simply upgrade with a new lease. This can optimize fuel consumption and lower maintenance and repair costs.
Lower Maintenance Costs with Commercial Vehicle Leasing
During the economic lifecycle of your fleet vehicles, maintenance needs will be fewer and less expensive. In addition, maintenance programs as part of your lease make routine maintenance and warranty service even simpler and more cost-effective. When leasing your fleet vehicles, lease maintenance programs can offer cost-savings on each service order. For example, a national fleet ID card helps ensure uniform pricing for services through approved vendors. Corporate claims management helps reduce unnecessary service and prevent breakdowns and costly repairs through expert maintenance management.
Fewer Administrative Tasks
Another way that commercial vehicle leasing can save your business money that often goes unnoticed is it helps lessen the administrative burden on you or your staff. With so many vehicles driving so many miles each year, there’s a lot of data to sort through about your vehicles. Some of that is helpful, like maintenance needs and fuel consumption information. However, some of that information simply doesn’t offer fleet managers any useful insights. With management services through your leasing company, an experienced team processes and compiles all that information for you. For example, simple maintenance reminder notifications, or on-demand fuel consumption reports available online at any time. Having someone else keeping track of maintenance schedules, proof of service, and other information helps free up your time for your fleet’s other needs.
Tax Benefits of Commercial Vehicle Leasing
Another great cost benefit of commercial vehicle leasing is the tax benefits associated with leasing. With an operating lease for your fleet vehicles, the vehicles stay off your balance sheet and you can claim up to 100% of your monthly lease payments on your company’s taxes. With capital leases, you can claim the depreciation of the vehicles as well as the interest on your lease payments. Therefore, there are several tax benefits for your business when you choose to lease your commercial vehicles.
Your Commercial Vehicle Leasing Company Passes Savings on to You
Also, your fleet vehicle leasing company has other ways of creating cost savings for your company. First, it’s important to understand our role when it compares to your fleet. Unlike consumer vehicle leasing, return business is of the utmost importance to commercial leasing companies. We want you to be happy and continue to do business with us, not nickel and dime you for small scratches. Another great benefit of working with a leasing company for your commercial vehicles is that we have strong relationships with vehicle manufacturers, upfitting vendors, and everyone you need to create your fleet. These relationships often translate into discounts that we pass directly onto you.
At Glesby Marks, we offer the most comprehensive array of commercial vehicle leasing and management solutions for your business. When you choose our team for your fleet’s needs, you’re never tied down by mileage restrictions or wear and tear clauses. We are dedicated to finding the most cost-effective options for your company, which is why we never charge you administrative fees or management fees. Our team provides you with all-in-one commercial vehicle services, from leasing to remarketing, to help you optimize your operations. Call us today at (800) 482-9498 to learn more and tell us about your transportation needs. We are here to serve you!