Sunday, 1 July 2007
For many New Zealand businesses, the decision to lease or own their vehicle fleet
can have a big impact on all parts of their operations.
In theory, it all seems so easy: choose the most suitable vehicle for your requirements, find the best price and do the deal. In reality, factors such as risk management, cash flow, OH&S, asset disposal and, increasingly, environmental impacts, are shaping decisions about leasing and fleet management in small and large companies. Vern McLaren, Head of Pricing and Risk with FleetPartners New Zealand, says utilisation of resources within companies is a primary reason for choosing to lease rather than own company vehicles.
“Many companies under-estimate the complexities of running a fleet and the time
involved. Often it is the Financial Officer or HR personnel who have to deal with a raft of policy and operational issues, tying up their time negotiating purchase prices on vehicles, authorising repairs and maintenance and managing disposal. Not only can their time be more productively utilised but there are experts who can reduce these costs,” he said.
Managing fixed costs and protecting cash flow are other key benefits of leasing versus owning. “Cash flow is an important consideration for all businesses. Meeting the up-front purchase cost of fleet vehicles can tie up significant amounts of business capital that could otherwise be invested in stock or services that increase turnover and generate profit. Then there is the risk of incurring losses on disposal of assets; the larger the fleet the greater the potential impact.”
For most New Zealand businesses, the choice of lease generally falls into two categories: a fully maintained or a non-maintained operating lease. Both options take company vehicles “off the balance sheet”.
Under a fully maintained lease all the operating costs, servicing, maintenance,
registration and tyres are covered by a single monthly payment. Terms range from
12 months to 45 months for passenger vehicles, generally 60 months for light
commercials and 84 months for heavy commercial vehicles.
With a non-maintained operating lease the lessee is responsible for all maintenance and other running costs. Mr McLaren said both lease types allowed businesses to better manage cash flow while reducing fixed costs. “Because a lease payment is a fixed monthly payment it allows businesses to accurately and efficiently manage expenses and cashflow,” he said.
Leasing is not just for the big guys. While most large New Zealand companies lease
their fleets, Mr McLaren said small companies could also benefit from the purchasing power and strategic advice available through fleet management companies like FleetPartners.
“The same principles apply to all businesses and that is they are trying to maximise operational and financial efficiency to deliver optimal performance and profit. This is where the fleet manager really delivers value,” he said.
“Our role is very strategic and much broader than just providing funding of the vehicle: our expertise in vehicle selection, purchasing power, vehicle management systems and vehicle disposal take much of the risk out of owning and managing a fleet and delivers important operational efficiencies.
“More broadly, our role encompasses wider issues such as OH&S (driver safety
and workplace issues), environmental sustainability (carbon emissions and energy),
HR (staff benefits, retention and recruitment) and even change management,”
Mr McLaren said.