If your business needs fleet vehicles, fleet leasing is a common way to acquire new vehicles. Leasing can help prevent tying up large amounts of capital in your vehicles and can also come with some other accounting benefits. One important thing to consider is whether you need an open-end or a closed-end lease for your fleet vehicles. Each has its pros and cons, and one may be better for your company than the other. We’ll go over the differences to help you choose the ideal leasing option for your business.
Fleet Leasing with Open-End Leases
An open-end lease essentially means you take ownership of the vehicle at the end of the lease. Also known as a capital lease, this commercial vehicle leasing option offers several benefits, including flexibility. This additional flexibility and control makes open-end leases more popular for fleet vehicles.
In an open-end lease, your company essentially takes on all the risk of depreciation. At the end of the lease, the leasing company helps with remarketing. If the sale price is more than the book value, you receive the difference. However, if the sale price is lower than book, then you must make up the difference with the leasing company.
Because you basically own the vehicle at the end of the lease, this means that open-end leases offer a large amount of room for your vehicles to adapt to your operations. For instance, there are no mileage restrictions or fees and there are generally no penalties for excessive wear and tear. It’s this flexibility that makes open-end fleet leasing one of the more popular options for businesses. These are great if you need vehicles longer-term and have variability in field operating conditions like wear and tear and mileage.
Commercial Vehicle Leasing with Closed-End Leases
Of course, many fleets prefer lower-risk commercial vehicle leasing options that don’t end in ownership. In these cases, a closed-end lease may make the most sense for your company. Closed end leases are also known as “walk-away leases” because you simply turn the vehicle in at the end of the lease and walk away. All the depreciation risk goes to the leasing company. These are a common choice for consumer leases, but can also be applied to fleets as well.
Compared to an open-end lease, closed-end lease costs are much more predictable. You pay the monthly payment for the lease and, in many cases, can purchase the vehicle at the end of the lease based on a predetermined amount you agree to at the beginning of the lease.
However, these leasing options often come with restrictions like mileage limits. In many cases, you’ll need to pay fees for miles driven over the agreed amount (for example, you might pay extra for every mile over 20,000 miles). In addition, if there’s excessive wear and tear on the vehicle, then a fee will likely apply for that as well. Therefore, closed-end leases are generally best if your fleet is fairly predictable in mileage and wear and tear. In many cases, businesses will opt for closed-end leases if their fleet isn’t part of their core operations.
Fleet Experts at Glesby Marks
When you need comprehensive fleet solutions, choose our team at Glesby Marks. We offer customized solutions to help you acquire the vehicles you need and keep them in top shape. Since 1976, we’ve been helping fleets of all types and sizes find ideal options for their needs and budget. Our team offers creative Houston commercial vehicle leasing services to help you achieve your objectives. Call us now at (800) 482-9498 to discuss your leasing needs with our fleet specialists!