Does your business need a company vehicle for making deliveries,traveling to clients’ offices, carrying equipment and more? Whetherbuying or leasing a vehicle is more advantageous for you depends ona variety of factors. And if you need several cars or vans forsalespeople or delivery drivers, you may be eligible for fleetleasing programs that can save you big money.
Leasing a small fleet of cars, minivans or pickups is easier andmore advantageous than ever. Businesses that buy or lease 10 ormore vehicles qualify as commercial fleet buyers and are given afleet registration number (obtained through the dealer), entitlingthem to all available manufacturers’ and dealers’ fleet incentiveprograms.
While manufacturers have always offered attractive discountprograms to commercial fleet buyers, there have rarely been suchprograms for the small fleet lessee requiring fewer than 10 cars.Nowadays, however, many dealers are beginning to offer their ownprograms to business owners and will work with you to get yourbusiness. In fact, some dealers can get you a fleet registrationnumber even if you lease only a few cars.
To decide whether fleet leasing is for you, sit down with youraccountant and estimate what it will cost, taking into accountmonthly lease payments, insurance, gas, oil, maintenance andlicense fees. Will you need to hire someone to manage the fleet? Ifnot, how will you keep tabs on regular tune-ups and administrativematters?
You may decide it’s more economical to give your employees anallowance and have them lease their own cars. These and otherquestions should be put to your accountant before making a decisionon fleet leasing. Always check to see what the penalties are forterminating a lease early, especially if your cash flow tends tofluctuate from month to month.
The typical considerations of leasing are multiplied when youlease several vehicles, so consider these possible pitfalls beforeyou sign on the dotted line:
- Higher insurance coverage. Some dealersrequire you to increase your insurance coverage since they, notyou, own the leased vehicles. Shop around for prices before youorder your fleet because insurance can amount to a lot of money. Asa business owner, you can probably get a blanket policy to coverboth your business and your fleet.
- Overextending your hard-earned bucks. Sixshiny new vehicles in your company parking lot may boost your ego,but do you really need them? It’s easy to get carried away whenordering a fleet, so make sure you have analyzed your needsthoroughly 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 centsfor each mile you drive the car over the limit. If you cover 50,000miles a year, it pays to buy rather than lease.
- Failing to compare buying price with leaseprice. Dealers may have vehicles on the lot they are anxious toget rid of and will give you a special deal if you buy rather thanlease. Ask the fleet manager to work out the figures for buying vs.leasing so you can see the difference, and always get it inwriting.
- Putting down too much money. Don??t betalked into a down payment that’s bigger than normal–first month’spayment, a small deposit and license fees.
- Forgetting state taxes. Although somestates, such as Nevada and Texas, have no state taxes, others, suchas California, have high registration fees and taxes, which must bepaid upfront when you lease a car.
- Getting buried under the paperwork.Operating a fleet of vehicles, however small, requires at the veryleast keeping track of mileage and expenses with a running reporton each vehicle so you can budget your cash outlay.
Once you’ve decided fleet leasing is for you, here are someadditional questions to ask:
- Do you need minivans, pickups or passenger cars? Determine whateach 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 andradios are probably needed, but leave the fancy options off theprice tag.
- How much trunk or cargo space is needed to accommodate yourproduct?
- How many miles a year will you clock? Most leases allow you12,000 to 15,000 miles annually before charging you by themile.
- Can you lease different types of vehicles from a singlemanufacturer? Leasing your fleet from a single dealer is moreefficient and economical, so shop around for a dealer that sellseach of the types of vehicles you require rather than having tolease your compact pickup from one dealer and your full-sized vanfrom another.
- When visiting dealerships, ask to meet with the fleet manager.He or she will be much more knowledgeable about programs andspecial deals than regular floor salespeople.
- Don’t just shop around for vehicles; shop different lenders aswell. Get a lease quote from the dealer first, and then run itthrough your bank to check for lower interest rates.
There are several fleet financing companies that will discussincentive programs, modified payments and your buying needs. Tofind them, ask your dealer to provide a business line of credit orto recommend a leasing company with whom the dealer already doesbusiness. Check out other lenders under “Leasing” in yourBusiness-to-Business Yellow Pages. Ask your bank about its fleetleasing programs. Or use a buying service, which negotiates thedeal and sets up the financing. You can find these in the YellowPages under “Automobile Brokers” or through auto clubs.
