Types of Fleet Leases
Here’s the difference between all the fleet leases and programs.
We’ll take the mystery and confusion out of the different types of fleet leases and how they work.
The most common fleet leases are Short-Term Lease, Long-Term Lease, Open-End Lease, Closed-End Lease, and Own-to-Lease.
We’ll take a closer look at each one and its advantages.
Most importantly, leasing isn’t suitable for everyone.
Therefore, if you aren’t sure about leasing a vehicle, then contact us, and we’ll take a look at your situation and see if leasing is best for you.
Vehicle Leasing vs Owning
There are many things to consider when looking at leasing or owning your fleet of vehicles. A rule of thumb is… if you have a high vehicle turnover rate in your fleet, it’s best to lease.
Below are comparisons between leasing and owning.
Leasing
- No down payment
- More Flexibility
- Replace Vehicles at Peak of Lifecycle
- Cost Savings
- 100% deductible payments
- Flexible leasing terms
- Drive newer vehicles
- Less downtime in the shop
- Predictable transportation costs
- Lease company disposes of vehicles
- Every 3-5 years upgrade to newer vehicles
Owning
- Pay for cost of the vehicle by cash or financing
- Large upfront cost can negatively affect cashflow
- Owner funds cost of repairs & maintenance
- Inflexible purchasing terms
- More downtime in the shop as vehicles age
- Owner has to dispose of the vehicles
- More budgeting costs
- No limit on miles driven
- Establish equity
- Higher payments
Short-Term Lease
A Short-Term Lease can be anywhere from 3 months up to 1 year. Therefore, a short-term lease might be the best answer if you need a car or work vehicle for a short period.
However, it’s essential to realize that the best benefit of a short-term lease option is less than buying a vehicle.
Advantages:
- Avoid any repair work or service on the vehicle.
- Your commitment is much smaller versus buying or a long-term lease.
- You can get a car for a while and not be tied into a long-term contract.
- Drive the most recent vehicles.
- Custom mileage requirements.
- Option to convert to a long-term lease.
So, if you’re in business, a short-term lease for a work truck, a commercial van, or a passenger van might be the best answer for you.
If you’re not sure if this is the best program for you, contact us, and we’ll see if this is the right program for your situation.
Long-Term Lease
A long-term lease usually starts at 24 months and goes up to four or five years. One of the most attractive advantages of a long-term lease is the lower monthly payments.
Advantages:
- Some manufacturers offer special incentives for a lease vehicle not available to a buyer.
- You can drive a nicer vehicle with all the equipment for less than buying the car.
- Low cost for maintenance; most are covered by the lease.
- There is no need to worry about the trade-in value or having to dispose of the vehicle at the end of the lease. Just drop it off with the leasing company/dealer.
- You drive the car during its most trouble-free years.
Lastly, long-term leasing is suited for those who want to drive a car over a more extended period but don’t want to purchase the vehicle.
Open-End Lease
If you are looking for a leasing plan as close to ownership as possible, with all the benefits of leasing, then the Open-End Lease may be the right plan for you.
In addition, the Lessee can extend this flexible open-end lease plan to a month-to-month basis once the term is up.
Advantages:
- At the termination of the lease, gains or losses from the sale are applied to Lessee.
- The plan offers variable and fixed interest rate options.
- Get all the tax advantages of leasing with the flexibility of ownership.
- Make a fixed payment based on estimated usage.
In brief, the Open-End Lease is expected more in the business world with fleet vehicles that tend to rack up many miles.
Closed-End Lease
The Closed-End Lease is known as the walkaway lease; you only have mileage limits and a set lease term. The leasing company determines the car’s value when the lease term is up.
The expected depreciation and the cost of financing, plus fees and taxes, make up your monthly payment.
Advantages:
- You are not financially responsible for any additional depreciation below the residual value.
- No obligation to purchase the vehicle.
- All your costs are known upfront.
- You are only responsible for damages and excess mileage at the end of the lease.
- No worrying about the value of your car declining and having to take a loss.
To sum it up… if you are looking for a fixed-term lease agreement for a pre-determined time, this may be the perfect lease. On the other hand, you have a purchase-option price if you want to buy the car.
Therefore, if the vehicle is worth more than the purchase-option price, it may be a good investment.
Own-to-Lease Program
This program is designed for our clients who own a fleet of cars and need to free up capital right away. So, to sum it up, this could be the perfect plan to sell your fleet in a short period quickly.
Advantages:
- Turn your fleet quickly by selling your vehicles to Rocky Mountain Auto Leasing.
- Improve your cash flow while keeping your vehicles on the road.