Optimize the total cost of ownership of your fleet

Can leasing help drive down your car fleet’s Total Cost of Ownership?

Here’s a comparison of the TCO of your fleet when you buy v/s when you lease.

As fleet managers, you need to make important decisions when it comes to getting your company car fleet up and running or replacing your existing fleet. It is crucial that you see the larger picture and take into account the costs of acquiring and operating the fleet, along with the time and resources you may invest in its upkeep.

Primarily, there are two ways to source your corporate car fleet Buying and Leasing. Each of these come with a certain set of costs — capital expenses (CAPEX) and operating expenses (OPEX).

● CAPEX — is the money a company spends on the purchase (outright/ via loans) of its fixed assets such as the company car fleet.

● OPEX — is an ongoing cost for running a product, business or system, as in the case of a corporate car lease for your company fleet.

With these costs in mind, a great way to ascertain if you should stick with buying your car fleet, or if a car leasing service is the right option for you, is to assess the Total Cost of Ownership of your fleet.

Total Cost of Ownership (TCO) is the cumulative cost of owning an asset, through its entire lifetime, right from acquisition to disposal. Simply put, it is the total cost you incur for owning an asset in the long term.

Let’s have a look at the various costs you incur, at different stages of your fleet’s life, through the lenses of buying and leasing.

Pre-purchase

● Upfront/ Acquisition Costs

This is the cost you pay for acquiring the fleet. When you buy, you either pay cash up front or pay a down payment and monthly EMIs, in case you decide to take a loan. Either way, there is a sizeable amount of money you have to put down early on.

Meanwhile, when you lease, you can free up capital, as there are no hefty down payments or upfront costs, just monthly lease rentals.

● Infrastructure/ Parking Costs

This is another important cost you need to be mindful of before you get your fleet in action. Especially when it comes to Electric Vehicles (EVs), you need to ensure you have the right infrastructure for charging, as well as a safe location for parking your cars while they aren’t being driven.

Post-purchase

● Operational Costs

Once you have acquired your fleet, you need to take care of its operational expenses.

When you buy your fleet via a bank loan, you tend to pay a significant amount in EMIs. For all the other expenses like maintenance and repairs, you also need to invest a considerable amount of time and resources — manpower or monetary — as they don’t come pre-packaged with your car.

When you lease, while you still pay for repairs and maintenance included in your monthly lease rentals, your leasing partner will take care of the hassles of maintenance and upkeep, along with various value-added services such as relief cars and 24x7 roadside assistance.

As the car leasing companies usually have tie-ups with workshops across various cities, they can stay on top of repair jobs and can help in significantly reducing the downtime for your fleet, while offering you preferential rates.

● Costs of Risks/ Accidents

It’s better to be prepared for all eventualities than to be caught off-guard. Ensure your basics such as insurance and other paperwork are in place.

You may have to invest a substantial amount of time and resources in finding the right insurance provider and policy when you directly purchase your fleet. Leasing, however, can help streamline this process, as the leasing partner gets you the right insurance coverage, and takes care of claim intimation, settlement and processing, in case of any mishaps.

● Disposal/ Resale Costs

Finally, when the time comes to upgrade or dispose of your fleet vehicles, you need to be mindful of what it’ll cost you. When you purchase your fleet directly, you end up bearing the cost of its depreciation. You also need to undertake the painful task of finding a decent deal for your vehicles. Running an old fleet beyond its optimal depreciation point eventually leads to a sharp increase in operational costs, over time.

Leasing, meanwhile, brings you flexible options at the end of your lease contract. You can easily upgrade to a newer set of cars by returning the previous car to the leasing company at the end of the lease or extend the contract. This makes it a hassle-free experience that doesn’t leave you with scrapyard-worthy cars at the end of operational life.

These are some important costs you need to be mindful of when looking to get your company car fleet running. A long-term view, that accounts for the TCO of your fleet, shows that car leasing brings you significant benefits, be it in the acquisition, operational or upgrade costs of your fleet.

A reliable car leasing partner can help you get the best out of your leased company car fleet. To explore car leasing and the host of benefits it brings you, click here