Considerations for Buying vs Leasing Fleet Vehicles

March 24, 2020

Along with improving efficiency, fleet managers have the responsibility of reducing costs. There are several ways fleet companies can cut costs, such as focusing on preventative fleet maintenance and optimizing fleet routing. But what most fleet managers often neglect to consider, is the money spent on fleet leasing vs. buying.

Many companies lease fleet vehicles because of the low initial investment. However, the overall costs of fleet leasing may not be worth it in the long run. Check out the below considerations before you lease or buy fleet vehicles.

Considerations for Fleet Vehicle Leasing

There are many benefits to enterprise fleet leasing. The first, and the leading incentive behind leasing vs buying fleet vehicles, is the low initial investment. However, there are several other benefits, as well as caveats, to leasing fleet vehicles. Let’s take a look at the pros and cons of each side.

First to consider, is that you’re not actually paying for the vehicle itself, you’re paying for the use of it. If you have an open-ended lease, then you have month-to-month leasing options. At the end of your agreement, you return the vehicle, although you may have the option to buy it instead. If you have a closed-end lease, it means that you have fixed-terms with structured payments. You cannot impose wear and tear beyond the agreed-upon terms. If you do, you may face penalties.

Despite these drawbacks, there are several benefits to leasing fleet vehicles. One, is the preservation of capital. Most fleet leases have lower monthly payments compared to buying fleet vehicles through financing. In addition, once the lease agreement ends, you can exchange the fleet vehicle for another newer model. This means they’ll require less maintenance, and you’ll likely exchange it before it needs major repairs.

Here are a few other benefits to leasing fleet vehicles:

Vehicle Replacement

As mentioned before, you often exchange a leased vehicle well before it’s worn down, reducing repair costs. Three years is the average term for a lease agreement, which means you aren’t locked to a single fleet vehicle for its entire lifespan. If you experience issues with a vehicle, you know you can trade it in soon, and without difficulty. Some vehicles aren’t as reliable as other models. Figuring this out after purchase is not a situation you want to be in.

Reduced Administration Costs

When you lease fleet vehicles, you don’t own them. This means you don’t have to worry about the title, registration, or taxes. In many cases, the leasing company will also take care of the tag, license renewal, and so forth, thus alleviating many of your administrative responsibilities.

Funding Management

Many fleet companies face budget restrictions, affecting their ability to replace vehicles. Leasing frees up this restriction. It also keeps you compliant with any vehicle replacement schedule you must adhere to. And since most leased vehicles are new, you’ll also continuously improve your drivers’ safety.

Newest Safety Measures

Safety measures for vehicles are constantly improving. The trend is shifting towards automation. Base models now have adaptable headlights and cruise control, and so much more. This also helps to reduce your liability and insurance costs.

Now that we’ve covered the considerations for leasing, let’s look at those for buying fleet vehicles.

Considerations for Buying Fleet Vehicles

There are also benefits to buying fleet vehicles. Perhaps the largest benefit over fleet vehicle leasing, is that there are no restrictions. You don’t have to worry about going over your allotted miles, or about any damage the vehicle might incur. Fleet vehicles experience a lot of wear and tear, and staying within leasing limits puts a lot of pressure on fleet managers. Let's look at the other pros and cons for buying a fleet vehicle.

Flexibility in Vehicle Disposal

If you experience issues with a vehicle, or you are unhappy with it, you’re not locked into an agreement. You will not incur any penalties for putting excess mileage or wear on a vehicle. This wear and tear will not impair your ability to sell the vehicle or purchase another.

Reduce Costs

When you lease a fleet vehicle, you make consistent monthly payments for its usage. You can never pay it off and enjoy the financial benefits of ownership. Leasing may cost less initially, but consider the long term expense. This includes the possible penalties for mileage and wear, plus the likelihood of higher insurance costs because many leasing agreements require greater insurance coverage that may be unnecessary.

Tax Benefits

Purchased vehicles depreciate, but the tax benefits of this depreciation aren’t seen by those who lease. Owners may be able to deduct the cost of the vehicle, its registration fees, fuel and maintenance expenses, as well as the depreciated value.

Reinvestment

Unlike small business fleet leasing, purchasing a vehicle builds equity over time. This means you can reinvest that positive equity, which may be beneficials to young companies just starting out. If you decide to sell your vehicle(s), you can apply its profit towards the acquisition of new assets. Otherwise, you may decide to trade in the vehicle for a newer one. Trading in your owned vehicle will reduce the costs of the newer vehicle.

Other Key Considerations for Buying vs. Leasing Fleet Vehicles

Though there are many benefits to owning a vehicle, there is also more risk. While you continue to make payments on the vehicle, it must appear on your balance sheet. Beyond this, there are other considerations you need to take into account.

  • Rate of return vs funds
  • Monthly budget
  • Maintenance expenses
  • Ability to negotiate prices
  • Depreciation
  • Credit
  • Long term costs

One good way to decide whether to purchase or lease fleet vehicles, is to check your turnover rate. If your vehicle turnover rate is higher than it should be, leasing may be your best option.


Whether you buy or lease fleet vehicles, you can lower your insurance costs, liability, and more with Azuga. We provide leading telematics systems for fleet tracking, and ELD compliance. Learn more about GPS fleet tracking, asset tracking, eLogs, and more, at Azuga.

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Considerations for Buying vs Leasing Fleet Vehicles

March 24, 2020

Along with improving efficiency, fleet managers have the responsibility of reducing costs. There are several ways fleet companies can cut costs, such as focusing on preventative fleet maintenance and optimizing fleet routing. But what most fleet managers often neglect to consider, is the money spent on fleet leasing vs. buying.

Many companies lease fleet vehicles because of the low initial investment. However, the overall costs of fleet leasing may not be worth it in the long run. Check out the below considerations before you lease or buy fleet vehicles.

Considerations for Fleet Vehicle Leasing

There are many benefits to enterprise fleet leasing. The first, and the leading incentive behind leasing vs buying fleet vehicles, is the low initial investment. However, there are several other benefits, as well as caveats, to leasing fleet vehicles. Let’s take a look at the pros and cons of each side.

First to consider, is that you’re not actually paying for the vehicle itself, you’re paying for the use of it. If you have an open-ended lease, then you have month-to-month leasing options. At the end of your agreement, you return the vehicle, although you may have the option to buy it instead. If you have a closed-end lease, it means that you have fixed-terms with structured payments. You cannot impose wear and tear beyond the agreed-upon terms. If you do, you may face penalties.

Despite these drawbacks, there are several benefits to leasing fleet vehicles. One, is the preservation of capital. Most fleet leases have lower monthly payments compared to buying fleet vehicles through financing. In addition, once the lease agreement ends, you can exchange the fleet vehicle for another newer model. This means they’ll require less maintenance, and you’ll likely exchange it before it needs major repairs.

Here are a few other benefits to leasing fleet vehicles:

Vehicle Replacement

As mentioned before, you often exchange a leased vehicle well before it’s worn down, reducing repair costs. Three years is the average term for a lease agreement, which means you aren’t locked to a single fleet vehicle for its entire lifespan. If you experience issues with a vehicle, you know you can trade it in soon, and without difficulty. Some vehicles aren’t as reliable as other models. Figuring this out after purchase is not a situation you want to be in.

Reduced Administration Costs

When you lease fleet vehicles, you don’t own them. This means you don’t have to worry about the title, registration, or taxes. In many cases, the leasing company will also take care of the tag, license renewal, and so forth, thus alleviating many of your administrative responsibilities.

Funding Management

Many fleet companies face budget restrictions, affecting their ability to replace vehicles. Leasing frees up this restriction. It also keeps you compliant with any vehicle replacement schedule you must adhere to. And since most leased vehicles are new, you’ll also continuously improve your drivers’ safety.

Newest Safety Measures

Safety measures for vehicles are constantly improving. The trend is shifting towards automation. Base models now have adaptable headlights and cruise control, and so much more. This also helps to reduce your liability and insurance costs.

Now that we’ve covered the considerations for leasing, let’s look at those for buying fleet vehicles.

Considerations for Buying Fleet Vehicles

There are also benefits to buying fleet vehicles. Perhaps the largest benefit over fleet vehicle leasing, is that there are no restrictions. You don’t have to worry about going over your allotted miles, or about any damage the vehicle might incur. Fleet vehicles experience a lot of wear and tear, and staying within leasing limits puts a lot of pressure on fleet managers. Let's look at the other pros and cons for buying a fleet vehicle.

Flexibility in Vehicle Disposal

If you experience issues with a vehicle, or you are unhappy with it, you’re not locked into an agreement. You will not incur any penalties for putting excess mileage or wear on a vehicle. This wear and tear will not impair your ability to sell the vehicle or purchase another.

Reduce Costs

When you lease a fleet vehicle, you make consistent monthly payments for its usage. You can never pay it off and enjoy the financial benefits of ownership. Leasing may cost less initially, but consider the long term expense. This includes the possible penalties for mileage and wear, plus the likelihood of higher insurance costs because many leasing agreements require greater insurance coverage that may be unnecessary.

Tax Benefits

Purchased vehicles depreciate, but the tax benefits of this depreciation aren’t seen by those who lease. Owners may be able to deduct the cost of the vehicle, its registration fees, fuel and maintenance expenses, as well as the depreciated value.

Reinvestment

Unlike small business fleet leasing, purchasing a vehicle builds equity over time. This means you can reinvest that positive equity, which may be beneficials to young companies just starting out. If you decide to sell your vehicle(s), you can apply its profit towards the acquisition of new assets. Otherwise, you may decide to trade in the vehicle for a newer one. Trading in your owned vehicle will reduce the costs of the newer vehicle.

Other Key Considerations for Buying vs. Leasing Fleet Vehicles

Though there are many benefits to owning a vehicle, there is also more risk. While you continue to make payments on the vehicle, it must appear on your balance sheet. Beyond this, there are other considerations you need to take into account.

One good way to decide whether to purchase or lease fleet vehicles, is to check your turnover rate. If your vehicle turnover rate is higher than it should be, leasing may be your best option.


Whether you buy or lease fleet vehicles, you can lower your insurance costs, liability, and more with Azuga. We provide leading telematics systems for fleet tracking, and ELD compliance. Learn more about GPS fleet tracking, asset tracking, eLogs, and more, at Azuga.

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