The financial risks that come with running a fleet are many and varied. The cost of vehicle accidents, including driver and vehicle downtime, repair costs, and increased insurance premiums, are just some of the risks fleet managers need to allow for in their policies and working practices. But perhaps one of the greatest financial risks comes with making decisions on funding fleet expansion and renewal of your fleet.
So, what questions should you be asking to get the most from your fleet budget while minimising risk and creating flexibility? There are three essential considerations for fleet managers to keep in mind:
1. Is buying better than leasing?
As with most financial choices, deciding whether to buy or lease fleet vehicles involves a trade-off between the overall cost to your organisation and the degree of risk you’re willing to accept. While the outright purchase of passenger and commercial vehicles can be an option that delivers lower costs overall, your organisation takes on all the risk associated with the vehicle’s lifetime expenses plus its eventual disposal and residual value.
Leasing, in the form of funding options such as an operating lease, may provide a greater degree of cost certainty and remove the risk associated with a vehicle’s disposal value, making short and long-term budgeting simpler.
2. Understanding the real cost of vehicles
While leasing has the potential to offer greater cost certainty, being clear on the total expected cost of a vehicle over the term of a lease can help fleet managers get the best value. For example, keeping vehicles for longer may seem to reduce your fleet budget, but lower purchase or leasing costs can sometimes be outweighed by additional maintenance needed as well as vehicle-off-road costs for scheduled and corrective repairs.
At Interleasing, we provide clients with a fit-for-purpose and whole of life cost analysis for available vehicle models. Not only does this help fleet managers select the most cost-effective and appropriate fit for their organisation’s needs, it can also support better decisions on funding and intervals for replacing vehicles.
3. The benefits of flexibility in leasing agreements
Building flexibility into leasing agreements can take financial risk management for vehicle acquisition one step further. Under certain types of flexible operating leases, the organisation and fleet company agree on a number of intervals in the term of the contract where the fleet manager can decide to terminate the lease without break costs or buy the vehicle for an agreed price. As each interval is reached, the terms of the lease can also be adjusted to accommodate changes in vehicle operating expenses over time.
Not only does this solution give fleet managers a cost-effective way to keep adapting their inventory to suit the organisation’s needs as they change, it can also create opportunities to keep control of operating and whole-of-life costs for each vehicle, and provide the potential to realise a profit upon disposal.
We go the extra mile to deliver value
Providing our clients with a whole of life cost analysis and flexible leasing options are just some of the ways we work with fleet managers to optimise ROI and identify and manage risks for their fleet assets and operations. In our Managing Fleet Risk Guide we share a holistic view of the different types of risk associated with running a fleet and share ideas and best-practice tips for developing a robust and comprehensive fleet policy.
For more about how we can help your fleet perform at its best, get in touch today.
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