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What type of lease is right
for your organisation?
Mace Hartley, General Manager
Smartfleet Management
Introduction
Leasing is often said to be the simplest way to acquire your transport needs; is this TRUE?
Contents
• Types of leases
• Reasons for leasing
• Cost components of an operating lease
• Advantages of leasing
• Disadvantages of leasing
• Summary
Types of Leases
Operating Lease
Fully Maintained
Partially
Maintained
Closed
Ended
Open Ended
Finance Lease
Novated Lease
Reasons for Leasing
Cashflow Balance Sheet
Cost Control
Buying Power
Knowledge & Resources
Hassle Free Risk
Reduction OH&S
Vehicle Purpose
Reasons for Leasing
Proposed Accounting Standards will impact the balance sheet of companies that use operating leases.
• On the table since 2006
• Joint project between IASB & FASB
• Most likely exclude leases <12 months
• Will impact debt ratio’s, equity ratio’s and other financial covenants
• Will increase compliance and governance costs
• Still in progress and unlikely to be implemented prior to 1st July 2016
Balance Sheet
Reasons for Leasing
• Often fleet management becomes the responsibility of procurement
• Great at purchasing however limited resources and experience with management of:
• Registration & Infringements
• Repairs & maintenance
• Fuel & E-Tag
• Lack of systems to centralise and control expenses
• Single person dependency
• Buying power of the collective
Knowledge & Resources
Cost Control
Buying Power
Reasons for Leasing
Vehicle Purpose:-
• Operating leases normally used for tool of trade vehicles where majority of usage is business use
• Novated leases used where there is little or no business usage
• Novated leases provide staff with benefits and choice of vehicle
• Novated leases generally produce expense saving in payroll tax
Vehicle Purpose
Reasons for Leasing
Risk Reduction:-
• Uncontrolled costs are capped by choosing either a fully or partially maintained operating lease
• The risk of losing fleet expertise due to staff movement is reduced by outsourcing your fleet management
• Engaging a fleet management company – registration renewal’s
• Any disposal cost and potential loss managed by the operating lease company
Risk Reduction
Reasons for Leasing
Occupational Health & Safety:-
• “The operating lease company owns the vehicles so they have the OH&S responsibility for regularly servicing it”
• “We allow our employees to salary package their vehicle so they have the OH&S responsibility for regularly servicing it”
OH&S
• An organisation cannot transfer or outsource its responsibility for providing a safe working environment for its employees
Cost Components of Operating Lease
Lease Repayments
Residual Value
Vehicle Cost
Special Equipment
Excess Fair, Wear & Tear
Costs
Running Costs
Interest Rates
Excess Kilometres
Excess Fair Wear & Tear
• How do your drivers treat your vehicles?
Advantages of Leasing
• No major capital outlay
• Quoting, ordering and disposal outsourced
• Known monthly costs
• Access to large buying power
• One bill for all vehicles
• Leverage knowledge of leasing company
• Management of servicing, registration and potentially insurance
outsourced
Disadvantages of Leasing
• How do you manage pool vehicles?
• How do you manage your non-leased vehicles?
• Do you know if vehicles are being serviced?
• Who is managing your infringements?
• Limited access to reporting and what about non-leased vehicles
• Extra fees if excess kilometres travelled
• Extra repair cost for excess fair wear & tear
• Early termination fees if your business needs change (interest and
movement in residual risk)
Summary
• Convenience equals cost!
• You can’t outsource your OH&S responsibilities!
• Multiple vehicle ownership makes managing your fleet
difficult!
• Refer AfMA reference library for assistance with
suggested policies
What Do You Think?
Leasing is often said to be the simplest way to acquire your transport needs; is this TRUE?
My View
Novated Lease
Finance Lease
Op Lease – Fully Maintained
Op Lease – Partially Maintained
Simple
Complex
Expensive Cheapest
Owned Fleet
Survey Results
Which state do you live in?
Which sector best describes your company?
Which title best describes your role?
How many vehicles are in your fleet?
What best describes how you fund your vehicles?
Survey Results
Which state do you live in?
Survey Results
Which sector best describes your company?
Survey Results
Which title best describes your role?
Response Chart Percentage Count
CEO, CFO, COO, GM 15.4% 4
State Manager 7.7% 2
Fleet Manager 26.9% 7
Procurement Manager 7.7% 2
Fleet Coordinator 11.5% 3
Other 30.8% 8
Total Responses 26
Survey Results
How many vehicles are in your fleet?
Survey Results What best describes how you fund your vehicles?
Response Chart Percentage Count
Mostly Operating Lease with some Owned Vehicles
32.0% 8
Mostly Operating Lease with some Financed & Owned Vehicles
4.0% 1
Mostly Owned with some Operating Lease Vehicles
40.0% 10
Mostly Owned with some Operating Lease & Other Financed Vehicles
24.0% 6
Total Responses 25
If you want more details, please contact: Saki Polychronopoulos National Sales Manager www.smartfleetaustralia.com.au PO Box 6738, St Kilda Road Central VIC 8008 Level 8, 11 Queens Road, Melbourne VIC 3004 [email protected] M +61 403 613 749 | D +61 3 9998 3225 | F 1300 764 522