As if managing your business wasn’t enough of a challenge, one day you wake up to find that your company needs a number of cars or trucks… and suddenly you are a fleet manager too. Buying a fleet is no small task and deserves some careful thought. Even having one car in the name of the business can trigger decisions and expenses you might not have imagined.
So how do you ensure you’re doing the right thing, and getting the right deal for your business? Here’s a few options:
Just say No
If you are not already managing a fleet, consider saving the hassle altogether. Outsourcing deliveries or driving to a third party – when possible – can save not just capital expenses, but also countless headaches. Fleet management is not for the faint of heart (or the light-of-wallet). If you’re not committed, don’t start. Consider instead a partnership with a local courier service, a limo company or a car rental agency.
Lease a Fleet
OK, if outsourcing is not for you, consider leasing a fleet. Leasing can be a good way to finance a growing fleet, and there are different leases available to fit almost any situation.
- Short-term leasing is ideal for seasonal businesses. Rent any number of cars or trucks for as little as 2 months.
- Save money with a “value lease” option – leasing vehicles that aren’t brand new but generally are still under warranty. Value leasing can be a great cost saving method.
- Lease now, buy later using a lease purchase agreement. Get the short-term advantages of a lease, but keep the cars you need rather than start a new lease later.
- Lease through a fleet management company: There are many firms out there who specialize in fleet services and offer a wide range of lease options such as open-ended leases, re-leasing, acquisition programs and buy-back programs.
Consider Buying Instead
Usually, a lease is the most expensive option in the long-term. Worse, a lease with low payments might lure you into selecting a more expensive vehicle than you really need.
Keep in mind that leases can improve cash flow, but you have to give the car back at the end of the term. Purchasing a car creates an asset on you balance sheet, and once you’re done paying for it, you own it forever. Use an online lease vs. buy calculator to see the difference in total cost – and cash flow – between a lease and a purchase.
If you have a mostly local / short-run business, don’t forget that you can still receive the Federal tax credit for buying an all-electric vehicle of up to $7,500 per vehicle. A handy list of qualified vehicles can be found on the IRS site.
CFO Tip: If you buy a fleet and then decide you’ve made the wrong decision, many fleet management companies offer of a buy-lease-back program. You sell the fleet to a fleet management company and lease the vehicles back from them immediately.
Keep in mind that when you buy even one car through your business, everything changes.
- Be sure you’ve worked with your insurance agent to get appropriate coverage.
- Keep great records on titles, plates, and smog certifications. Don’t miss a filing deadline!
- Minimize your liability (and danger to your workers) by keeping the vehicles in good working order. Regular maintenance reduces cost in the long run.
- Screen your employees better! It’s hard to believe but not everyone has a valid driver’s license. Don’t assume anything. Keep a copy of all employee’s licenses — and to be really safe, run a background check to be sure the license is valid.
- Find a safe parking space – someplace to keep the cars overnight. Consider building fences around parking areas that have expensive fleet vehicles.
Every business is different, so are their transportation needs. Don’t rush into buying a fleet by any means – take your time and make sure the decision you make is the right one.
Guest blogger Arvid Linde is a credit and leasing expert with CreditPlus in the UK.