Fleet managers are always seeking ways to gain efficiency and lower costs, so one of the things they will look at first are the various types of fleet leasing programs, to find an economical one that fits the needs of their company. There are always many different features and details associated with fleet leasing programs that are not immediately apparent to the casual observer. To obtain just the right fleet lease for your company, you have to review all candidate programs carefully, so that you can identify the advantages and disadvantages of each one. You may even find that it makes more sense for your company to purchase the vehicles outright, rather than leasing them. If you do decide to go ahead with a leasing program, you’ll need to have an understanding of all the different types of fleet leases, and this article will explain what those are, so you’ll have a good baseline to make your decision.
Types of fleet leases
Below is an overview of the most common fleet leasing programs, so if you’re a fleet manager, you can have a basic understanding of the features associated with each:
- short-term flexible leases – these types of commercial vehicle leases will generally involve leasing a vehicle for terms between a few months and one year. They are meant to cover situations where it doesn’t make sense to use either a traditional lease or some kind of daily rental service. For such situations, fleet managers will need something in between these two lease types, and that’s a gap that is well filled by a short-term lease. This commonly comes into play in businesses where seasonality is a prime aspect of the business.
- value leasing programs – these are sometimes referred to as own-to-lease programs, and they allow you to lease pre-owned vehicles, to save some significant money. Most of the time, the vehicles are still covered under the warranty provided by the original manufacturer, so even pre-owned, low-mileage vehicles can be advantageous to operate.
- leaseback programs – sale and leaseback programs make it possible for a fleet manager to free up cash flow while also attempting to streamline operations. Streamlining occurs after converting all the vehicles you own into leased vehicles. These programs are typically used by fleet managers to consolidate leases with a single provider, and sometimes to restructure their leasing arrangements altogether.
- open-end leases – these types of leases provide the most flexibility of any leasing program available. All vehicles are set up on an amortization schedule which is grounded on the mileage driven annually, as well as best business practices. This kind of lease gives you all the benefits of leasing while also retaining many of the features of ownership. For instance, there are no restrictions on mileage and there are no penalties involved. You can return the vehicle to the leasing company at any time after the stated minimum period has expired. Keep in mind that the customer is responsible for maintaining the vehicle’s book value under an open-end lease.
- closed-end leases – leases identified as closed-end leases will always have some kind of restrictions involved, usually in the terms and the return dates for the vehicles. When you arrange for a closed-end lease, you’ll get locked into an agreement that carries several specifications, and if you don’t follow one or more of these specified terms, you will undoubtedly be assessed some kind of penalty. Such penalties can occur when companies exceed the mileage limit of a leased vehicle, or they turn the vehicle in too soon or too late. Even though closed-end leases carry these specifications and are considered to be fixed leases, they can sometimes be much more cost-effective than open-ended leases. This is especially true if you have low mileage across your entire fleet, and mileage is predictable from one month to the next.
Choosing the right type of lease
So which of the lease types described above is most beneficial for your company? When you’re trying to figure out which of these will be the best fit for your company, keep these factors in mind:
- flexible leasing options – not all leasing companies provide the same number of leasing options or the same variety. Make sure to choose a leasing company that offers the kind of leasing structure that works best for your company.
- environmental issues – many consumers and companies are now seeking to work with partners that have a commitment to diversity and sustainability. You may want to choose a leasing company that has this commitment.
- additional fleet services – beyond arranging for a particular fleet leasing company, you may want to look for a leasing company that also provides other services such as maintenance, fuel supplies, and maybe even telematics.
- testimonials – you can always find out a great deal about a company by reading testimonials from clients who have used their services. Seek out a list of references as well as testimonials to find out everything you can about a potential leasing company.
- customer service – no matter who you’re working with, you’ll always want to receive the best possible customer service. You should be able to count on having a human answer your telephone calls rather than have all your messages handled by some kind of robot or have your messages go directly to voicemail.
