The benefits of Sale Leaseback for modern fleet management
November 07, 2024
It’s a question as old as commercial fleets themselves. Is it better to own or lease your fleet vehicles? The ultimate answer about fleet leasing depends on the specific makeup of your fleet.
Recent data on commercial fleet composition tells us that 80% of companies with mid-to-large size fleets lease their vehicles, while only 20% exclusively own their vehicles.
Element Fleet Management offers fleet leaders the option to enjoy the best of both worlds. Our Sale Leaseback program provides an alternative funding source to clients who currently own their fleet vehicles. Through the program, they sell their vehicles to us, and we lease them back with favorable rates and flexible terms.
Three reasons to consider a fleet vehicle leasing strategy
There are several ways in which a leasing strategy can improve your overall fleet operations. Here are the top three:
- Increase cashflow
Fewer dollars committed to purchasing vehicles means more dollars available to invest in higher ROI projects. Leasing allows you to:
- Preserve capital otherwise spent on purchases
- Take advantage of flexible interest rates
- Decrease the tax burdens associated with monthly lease payments
- Reduce your total cost of ownership (TCO) through fleet vehicle leasing
Removing the cost of your vehicles from your TCO can make a big difference. There are some simple reasons leasing can lower overall costs:
- Lower upfront costs by switching to monthly lease payments
- Net Present Values of cashflow cycles are typically lower
- Managed leasing programs can be 10-15% less expensive
- Fleet upgrades
Leasing provides more control over the evolution of your fleet, allowing you to upgrade to newer vehicle models independent of your capital budgeting process. That means:
- The latest advancements, for both sustainability and efficiency
- Replacement strategies optimized for performance, not budget schedules
- Less age-related maintenance expenses
How does the Sale Leaseback Program work?
Element offers an open-ended Terminal Rental Adjustment Clause (TRAC) lease, which offers the same flexibility as ownership. Clients retain the exclusive use of fleet vehicles and control of vehicle selection, operation, and cycle timing. You can access flexible lease rates (fixed or floating), service life, and lease terms. In addition, our open-ended TRAC lease option has no end-of-term penalties, eliminating the need for end-of-term wear and tear or over-mileage penalties.
Because Element’s expertise is fleet management, we can assume up to 100% responsibility for a client’s vehicles as part of the sale leaseback process. Sale leaseback clients who aren’t ready to hand over full responsibility to Element can still pick and choose from our broad product offerings, including:
- Element handling all the paperwork related to the transaction
- Access to our full data analysis of their current fleet’s effectiveness and recommendations based on that analysis
- On vehicles that are at or beyond the end of their useful life for the client
- Our suite of product offerings can be plugged in where needed at a corporate or even a division level
Sale leaseback clients also have access to our fleet technology so management and drivers can see how their fleets are performing. This significantly reduces paperwork and administration, while still maintaining high levels of transparency and access to data.
Why choose Element for your fleet vehicle leasing?
Given our strong balance sheet, Element is well-positioned to support its clients with various fleet needs. We have significant advantages of scale and expertise as the global leader in fleet management, and we have a proven track record of leveraging our leadership position to bring meaningful productivity savings opportunities to our clients each year.
In 2023 alone, we identified $1.7 billion in overall savings.
With billions of dollars in contractually committed, undrawn borrowing capacity, we can confidently fund originations for clients, procure services for clients, and continue to invest in our business to bring the very best expertise and service to our clients.
Can government fleets benefit from sale leaseback?
Yes. Element estimates that in the United States and Canada alone, there is $2 billion of potential annual revenue to be accessed from governments and companies that own their own fleets. The sale leaseback process is a unique opportunity for state, city, and local municipalities to take advantage of the benefits of our company’s economies of scale and insight. The result is the outsourcing of vehicle ownership, improved vehicle performance, and a sizeable cash infusion.
Next steps in reducing fleet vehicle cost with leasing
Engage Element's Strategic Advisory Services to help you analyze the financial impact of leasing vs owning. If leasing is the right choice for you, consider a sale leaseback to help ease the transition. Element provides tailored fleet financing options that improve cashflow and deliver cost savings.
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