There has been a major increase in the number of fleets looking to sell their vehicles and lease them back.
According to ING Car Lease, there has been a 50% increase in fleet operators considering the schemes, which offer them the opportunity to free up capital tied up in their vehicles.
“Companies with a medium to large size vehicle fleet can release significant cash into the business, improving cash flow and balance sheet positioning by transferring their fleet to us at market or company book value and then leasing the vehicles back,” said Will Townsend, regional sales manager at ING Car Lease.
“Around 40-50% of all company cars are still on the balance sheet, so there are a lot of companies that can benefit from the sale and leaseback option.”
He said the company has seen a 15% increase in the number of companies asking it to underwrite their fleets, which is another sign of the tightening economy.
However, fleet consultant Alistair Kendrick told fleet managers that sale and leaseback is not a sure-fire method to quickly free up capital.
He said managers should be setting the agenda when dealing with leasing companies.
“The major problem with this scheme though is that fleets can get bogged down in an enormous amount of detail, especially if you have a large fleet.
“Companies need to set down reasonable grounds for valuation from the outset or it could end up taking between six to 12 months, which is hardly a short-term solution,” said Mr Kendrick.
“If a fleet manager is not careful they could end up with a leasing company getting their vehicles at under-value.”
Mark Andrews, head of marketing and business strategy at LeasePlan, said that sale and leaseback arrangements can offer a number of benefits, especially removing the capital risk of owning a fleet, however companies do need to do their homework before entering into a contract.
“Sale and leaseback won’t be appropriate for all companies,” he said.
“So before a company goes down this route they need to ensure they work with their leasing provider to see if it’s a good fit for their needs.”