Economic doubt sees a 50% increase in the number of fleets considering leaseback schemes
Who owns their fleet these days?
Despite the arguments put forward in favour of leasing, there are still hundreds, maybe thousands, of outright purchased fleets in the UK.
But times are tough and according to new research, more and more fleets are looking to free up capital by selling vehicles and leasing them back.
A recent survey by ING Car Lease found that there has been a 50% rise in the number of
fleet operators thinking about using a similar approach.
John Lewis, director of the British Vehicle Rental and Leasing Association, says: “Our members tell us that sale and leaseback is on the increase, and it is easy to see why.
"With so much economic uncertainty, it makes sense for companies.
“Many organisations that previously bought vehicles are transferring their fleet en masse and looking to get all the advantages of leasing at once.”
Sale and leaseback is exactly what it says. Any company looking to get their vehicles off the balance sheet can enter into an agreement where those vehicles are valued and bought by a supplier, and then leased back.
The fiscal injection gained from selling vehicles is an obvious attraction for cash-strapped businesses looking to free up capital.
Importantly, getting your vehicles off the books means that you are no longer saddled with depreciating assets.
“By giving the responsibility of your fleet to a leasing provider you are removing risk, particularly the depreciating residual value risk,” says Ian Smyth, sale and leaseback implementation manager at LeasePlan.
Last year equipment firm Speedy Hire took on 740 new vehicles as part of the takeover of Hewden Tools.
In a matter of days, Speedy had sold the units to its leasing provider Lex and pocketed £4.5million.
Ian Leonard, Speedy’s fleet director, advocates the process in general as it removes the residual risk and gives companies a more regimented fleet management structure, with service, maintenance and disposal controlled by an outside party.
“Sale and leaseback is effective as it gets vehicles straight into a replacement programme.
"It means we don’t have a lot of vehicles languishing around burning money,” Mr Leonard says.
“Once vehicles have completed the process they are then part of a mechanism and it’s the leasing provider’s responsibility to remind you that the vehicles are due for service and renewal.”
As well as the short-term cash benefits, leasing also means that future budgeting is easier, with vehicle costs set at a fixed rate.
“The quicker you get assets into a fixed programme the easier it is to plan and budget,” adds Mr Leonard.
For some smaller companies, the true appeal of sale and leaseback often lies in the management benefits.
Loss adjustors Merlin recently sold its 31 owned vehicles to Zenith Vehicle Contracts.
Like many Fleet News readers, Merlin’s facilities manager had a number of roles to juggle and the deal allowed her to free up much-needed time, while keeping an eye on the fleet.
“A business of our size is not big enough to employ a dedicated manager or fleet team,” explains Keith Broom, chief financial officer at Merlin.
“We wanted our facilities manager to be able to step back from the day-to-day problems of running the fleet – checking tyres and tax – but have her on hand to make sure that we are getting a quality service from the supplier.”
If sale and leaseback looks like it might be an option, managers must remember to do their homework and honestly assess their vehicles, says Ian Smyth.
“The issue for companies is that they get a good value for their current fleet. Many companies think cars are worth more than they really are.”
The valuation process can be a sticking point and it depends on the information at hand.
“Small fleets need to make sure they have the right information – make, model and mileages – and it helps if this information is centralised,” stresses John Webb, associate director at Lex Momentum.
Mr Webb is adamant that instead of jumping into a cheap deal, companies must understand their fleet’s requirements and go for the best package that suits them.
This includes careful consideration of service, maintenance, repair, renewal and accident management needs.
“Chasing the lowest deal is not the best way forward.
“You need to look for transparency, make sure that the leasing company walks you through the process and will deliver to your business needs in the long-term.”
"The quicker you get assets into a fixed programme, the easier it is to plan and budget."