Also from the Web
Definition: Vehicles owned by a company and used for business purposes .
Does your business need a company vehicle for making deliveries, traveling to clients' offices, carrying equipment and more? Whether buying or leasing a vehicle is more advantageous for you depends on a variety of factors. And if you need several cars or vans for salespeople or delivery drivers, you may be eligible for fleet leasing programs that can save you big money.
Leasing a small fleet of cars, minivans or pickups is easier and more advantageous than ever. Businesses that buy or lease 10 or more vehicles qualify as commercial fleet buyers and are given a fleet registration number (obtained through the dealer), entitling them to all available manufacturers' and dealers' fleet incentive programs.
While manufacturers have always offered attractive discount programs to commercial fleet buyers, there have rarely been such programs for the small fleet lessee requiring fewer than 10 cars. Nowadays, however, many dealers are beginning to offer their own programs to business owners and will work with you to get your business. In fact, some dealers can get you a fleet registration number even if you lease only a few cars.
To decide whether fleet leasing is for you, sit down with your accountant and estimate what it will cost, taking into account monthly lease payments, insurance, gas, oil, maintenance and license fees. Will you need to hire someone to manage the fleet? If not, how will you keep tabs on regular tune-ups and administrative matters?
You may decide it's more economical to give your employees an allowance and have them lease their own cars. These and other questions should be put to your accountant before making a decision on fleet leasing. Always check to see what the penalties are for terminating a lease early, especially if your cash flow tends to fluctuate from month to month.
The typical considerations of leasing are multiplied when you lease several vehicles, so consider these possible pitfalls before you sign on the dotted line:
- Higher insurance coverage. Some dealers require you to increase your insurance coverage since they, not you, own the leased vehicles. Shop around for prices before you order your fleet because insurance can amount to a lot of money. As a business owner, you can probably get a blanket policy to cover both your business and your fleet.
- Overextending your hard-earned bucks. Six shiny new vehicles in your company parking lot may boost your ego, but do you really need them? It's easy to get carried away when ordering a fleet, so make sure you have analyzed your needs thoroughly before signing on the dotted line.
- Neglecting to ask about mileage limits. These can vary radically and can cost you as much as 15 to 20 cents for each mile you drive the car over the limit. If you cover 50,000 miles a year, it pays to buy rather than lease.
- Failing to compare buying price with lease price. Dealers may have vehicles on the lot they are anxious to get rid of and will give you a special deal if you buy rather than lease. Ask the fleet manager to work out the figures for buying vs. leasing so you can see the difference, and always get it in writing.
- Putting down too much money. Don??t be talked into a down payment that's bigger than normal--first month's payment, a small deposit and license fees.
- Forgetting state taxes. Although some states, such as Nevada and Texas, have no state taxes, others, such as California, have high registration fees and taxes, which must be paid upfront when you lease a car.
- Getting buried under the paperwork. Operating a fleet of vehicles, however small, requires at the very least keeping track of mileage and expenses with a running report on each vehicle so you can budget your cash outlay.
Once you've decided fleet leasing is for you, here are some additional questions to ask:
- Do you need minivans, pickups or passenger cars? Determine what each vehicle will be used for.
- Do you need to specially equip the vans and pickups?
- What options do you need on each vehicle? Air conditioning and radios are probably needed, but leave the fancy options off the price tag.
- How much trunk or cargo space is needed to accommodate your product?
- How many miles a year will you clock? Most leases allow you 12,000 to 15,000 miles annually before charging you by the mile.
- Can you lease different types of vehicles from a single manufacturer? Leasing your fleet from a single dealer is more efficient and economical, so shop around for a dealer that sells each of the types of vehicles you require rather than having to lease your compact pickup from one dealer and your full-sized van from another.
- When visiting dealerships, ask to meet with the fleet manager. He or she will be much more knowledgeable about programs and special deals than regular floor salespeople.
- Don't just shop around for vehicles; shop different lenders as well. Get a lease quote from the dealer first, and then run it through your bank to check for lower interest rates.
There are several fleet financing companies that will discuss incentive programs, modified payments and your buying needs. To find them, ask your dealer to provide a business line of credit or to recommend a leasing company with whom the dealer already does business. Check out other lenders under "Leasing" in your Business-to-Business Yellow Pages. Ask your bank about its fleet leasing programs. Or use a buying service, which negotiates the deal and sets up the financing. You can find these in the Yellow Pages under "Automobile Brokers" or through auto clubs.
For reprints and licensing questions, click here.