Leasing your company vehicles with Custom Fleet is a smart way to improve cash flow, reduce asset depreciation and save time. Free up capital and resources so you can invest in growth strategies for your business, and adapt your fleet as your needs change.
Leasing or owning: Which will take your fleet further?
The important decision of whether to lease or own your fleet vehicles often comes down to cost effectiveness, and cash flow implications.
This table shows how the two most popular leasing options compare with ownership.
| OPERATING LEASE | FINANCE LEASE | OWNERSHIP | |
|---|---|---|---|
| Capital | Frees up capital for use in other revenue generating investments – good for organisations with a high internal rate of return | Frees up capital for use in other revenue generating investments – good for organisations with a low internal rate of return | Capital is tied to the asset for its useful life - good for organisations with a low internal rate of return |
| GOS / LOS | Gain or loss on sale of asset is with the lessor – good for organisations with a low risk appetite | Gain or loss on sale of asset is with the lessee – good for organisations with a high risk appetite | Gain or loss on sale of asset is with the lessee – good for organisations with a high risk appetite |
| Cash Flow | Consistent consolidated monthly payments smoothing cash flow | Has the potential for inconsistent cash flow. I.e. while there are no additional charges if you run over expected usage or damage the vehicle, this will still affect the sale price at the end of the vehicle’s life | |
| Additional Services | Potential to incorporate additional services, such as maintenance or telematics, simplifying invoicing and supplier management structures | Any additional services would need to be sourced and managed independently | |
| Balance Sheet | Off balance sheet – some organisations prefer assets to be off-balance sheet for accounting purposes* | On balance sheet | |
*This may change with the proposed IASB changes to on and off balance sheet asset treatment
For fleets of 25 or more vehicles, leasing is the best option due to its capital conservation benefits. As you won’t need a down payment, less capital is needed up-front, which means it is free to be invested in business growth instead. Leasing is especially beneficial for companies that require a high internal rate of return.
