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 payment
- 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
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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
Company Ownership
Vehicle ownership requires a substantial investment in time, money, staff and equipment costs which the lessor spreads over time and over many vehicles, thereby reducing overhead for its customers. For companies who prefer ownership, Velcor® offers cost-controlling fleet management services to reduce the administrative burden of vehicles.
Advantages
- Depreciation is available to purchaser
- Control over corporate image and suitability of vehicles
Financial Disadvantages
- Requires significant cash outlay
- Requires outside financing/use of company credit lines
- Loss of profitable cash investment opportunities
- No volume purchasing power
- Vehicle capitalized on balance sheet
- Must manage loan portfolio
- 100% sales tax impact on purchase price
- Investment Tax Credits have been eliminated
- Depreciation write-offs have been curtailed
- Corporation now subject to Alternative Minimum Tax
Administrative Disadvantages
- No fleet management expertise
- Must maintain selling and purchasing division
- Requires extensive tracking and recordkeeping
- Use up computer space, time and personnel
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Administrative burden falls to owner:
- Vehicle ‘shopping’ and price negotiations
- License, title, sales tax and insurance compliance
- Maintenance and repair administration and monitoring
- Warranty and extended warranty recovery
- Manufacturer recall campaigns
- Rental/pool emergency replacements
- Finance and Accounting
- Limited vendor network for services
- Limited manufacturer fleet incentives and rebates
- Owner must monitor government laws and regulations
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Availability of other lessor services including:
- Must handle negotiations, paperwork and disposal
- Price haggling for direct sales to employees
