Leasing
Leasing is an efficient and economical method of vehicle acquisition and fleet administration for companies who need to conserve capital for their primary business. Leasing keeps credit lines open, improves cash flow and with the right lessor, provides the full service of an experienced leasing and management organization.
Financial Advantages
- No large cash outlays or down payments
- Frees up funds for profit making investments
- Keeps credit lines open for company growth
- Vehicle financing covers 100% of the cost
- Off balance sheet financing of vehicles
- Budgetable expense with a predictable monthly cash flow
- Capital outlay is only for the portion of the vehicle used
- Choice of financing options and terms
- Availability of multiple financing sources
- One time credit review – no need to reestablish credit
- Federal, state, and local tax administration
- No up front sales tax where use/rental tax applies (dependent on the state)
- Use tax paid in future dollars over the term of the lease
- Vehicles obtained at predetermined prices
- Lower costs through lessor's volume purchasing
- 100% pass through of factory fleet incentives
Administrative Advantages
- No separate purchasing and selling organization necessary
- One source supplier for vehicles, maintenance and fuel
- Unrestricted choice of makes and models from all manufacturers
- Expertise in vehicle selection
- Wide variety of used car disposal methods
- Lessor handles record keeping and administration of:
- Accounting and Finance
- License, Title and Insurance
- Manufacturer Recall Campaigns
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Availability of other lessor services including:
- Maintenance and repair cost control
- Extensive national account network for maintenance
- Rental/pool car programs
- Emergency replacements
- Sophisticated data analysis and reports
- Universal Fuel Cards
- Consolidated monthly billing from one vendor for all fleet related costs
- Virtually no out-of-pocket driver expenses
- Control over corporate image
- Customized, flexible programs for every fleet
Disadvantages
- Fleet locked in for a period of time
- Not advisable under certain tax situations
Driver Reimbursement
Driver reimbursement is the most costly, least efficient and inequitable way to obtain business transportation. It offers the least amount of control by the employer over the operating costs, safety, model, value, and condition of the employee's vehicle. Moreover, reimbursement requires costly record keeping substantiating and processing driver mileage reports.
Advantages
- No large cash outlay
- No balance sheet effect
- Purchasing, maintenance and selling are done by the employee
- No tracking of drivers' personal use is necessary
- No vehicle are related to terminated or transferred employees
Disadvantages
- Reimbursement puts the financial pressure on the employee
- Driver must buy vehicle at retail price
- Driver must borrow at higher individual interest rates
- 100% sales tax impact on the purchase price
- Driver pays retain price for maintenance, repairs, etc.
- Business usage increases the driver's insurance premium
- Drivers generally are not aware of the most economical vehicle, resulting in higher fuel/operating costs
- Personal vehicle tends to be kept longer, thus increasing operating costs and down time for repairs
- Burden of handling multiple expenses and mileage reports for all drivers
- No control over age, type and image of employee vehicles
- No assurance of safety and reliability of employee owned cars
- Employer must monitor insurance coverage and see that company is name as the additional insured
- Utility requirements of vehicle likely to be inadequate
- Research and tracking required to ensure fair compensation for different mileage's, territories, and geographic locations
- Loss of recruitment advantage and employee retention due to absence of a company car
- Less control over downtime when company does not oversee maintenance
- Reimbursement programs are often hard to explain to drivers and are perceived as unfair and cause dissatisfaction
