Leasing or buying? All fleet managers face this issue at one stage, and confidently making a decision is not easy. The uncertainty around Covid has certainly swayed the dial towards leasing, but both choices have certain pros/cons. We can’t tell you which approach is better, but we can give some tips to help you move forward and make an informed decision.
Common considerations for fleet managers
All fleets have their unique challenges and opportunities, so there can’t be a one-size-fits-all approach. As a fleet manager, you need to consider numerous factors like your budget, company goals, fleet size, etc. We believe that the following 5 considerations have the most impact on whether you should lease or purchase your fleet vehicles.
Your company’s financial condition has the biggest impact on whether you should buy or lease.
Purchasing vehicles is obviously more expensive and has significant upfront costs. However, a vehicle fleet is an asset and can increase the overall worth of your business. You must also remember that vehicles lose their value in the market over time, and you can claim tax benefits against that. When you are leasing, those benefits would be absorbed by your leasing partner.
On the other hand, leasing is the preferred option for those who do not want to bear upfront costs. You instead pledge to pay a monthly fee over an agreed-upon period. In many cases, leasing can be a better option even if you have the money to buy. Working capital can help you maintain effective operations and attract potential investors and other lenders to your business.
The second major consideration is the maintenance of vehicles in your fleet. Leasing seems like the better option if that’s your only concern. Typically leased vehicles are the latest model that does not require too many trips to the workshop. You also save a lot on fuel because newer models are generally more fuel-efficient.
In many cases, lease providers have their maintenance partners across different locations. Depending on the agreement, you can also ask for a replacement vehicle when your leased car is in the workshop. As a result, you can ensure consistent and reliable fleet operations without worrying.
When you buy a vehicle for your fleet, there will be many administrative tasks you’ll need to perform regularly. You’ll need to fill out tax details, deal with insurance, and ensure complete paperwork for every vehicle in your fleet. Leasing would reduce all that burden and allow you to spend more time on other important tasks. However, remember that you’ll have to pay extra for all these additional services.
4. Business needs
Are you operating an intercity fleet? Or do you have any mileage limits for your drivers or cars? These questions are important to determine if it’s suitable for you to buy or lease the vehicles in your fleet. If you want more operational freedom, it’s better to buy your fleet’s vehicles.
Generally, leasing vehicles is a more flexible approach if you plan to change all the vehicles every few years. For many applications, you might also need certain cars for only a short time. In such instances, you’ll generally prefer leasing the vehicle because it would be more cost-effective. However, do check out all the terms and conditions in detail because most lease providers add hidden stipulations and other penalties.
6. Access to Data
Most important to Fleetyr and Fleet managers, when choosing to lease, do you get full and uninterrupted access to data. Most leasing companies offer account management services, but it is still important you have access to this data to improve operations and safety. We also pointed out in our 4 trends driving the ANZ transportation and mobility industry in 2021 blog article that your data may have monetary value in the future to those creating smart cities initiatives and plans across the country.
Making the best choice
Should you buy or lease your fleet? There is no right answer to this question. Fleet managers need to weigh the pros and cons of both options and decide the best approach according to their situation.
Generally, the aforementioned five considerations are enough for fleet managers to make an informed decision, but you’ll have to evaluate other factors as well if that’s required. In most cases, the higher management is also involved in this process, so together, you can decide which direction to take.