David: I manage a Fleet of 74 vehicles and plant at the Australian Institute of Sport Campus in Canberra and have been asked to develop and submit a comparative analysis of the current operating model of buying our Fleet Assets outright versus a leasing model.
I am sure this has been done a million times and I don't want to reinvent the wheel. Has anyone undertaken this exercise before for a similar sized Fleet, what were the Terms of Reference you used along with any Fleet data metrics that enabled your Executive to effectively decide on which operating model suited the organisation/business?
Jon: Hi - we are looking for similar information.
Steve: I have a bit of a different slant on this subject, so I'll share my thoughts and hopefully it will help. Any analysis you do is fundamental flawed because of the timing difference and assumptions, and how accurate you are with km projections. That is your leasing quote is current, and fixed for x years, while your "owned" calculations are based on vehicles bought years ago and sold now or bought now and sold in the future. The main cost influence will be who has the most bullish view of the future value -you or the leasing company. The best strategy is to run several scenarios on best and worst case of future value -and compare that to what happens if your vehicle travels km (quantify your lease cost if your vehicle run under or over km). Acquisition/disposal -there is very little difference -if you have someone with a commercial focus. Same applies for managing servicing. Funding, most likely as a govt related identity your funding cost will be lower. What it comes down to is your appetite for risk (specifically future values). No risk -take the leasing option and have fixed costs -but be aware the leasing company is taking this risk and building in a risk premium. Lowest cost, own the vehicles and ride the fluctuations of the used car market and tour km variances. Your analysis, if you build in different future value calculations and allowance for km variances will quantify the level of risk.
Michael: Hi I am also interested in this information.
Marc: Hi everyone, Here's a link where the accountants explain buy v lease. The general recommendation is it's cheaper to own the assets and leasing works when there is limited capital available within the business. https://intheblack.cpaaustralia.com.au/accounting/own-lease-business-assets
Click in the link to view more subjects or to contribute to the discussion.
Ask Your Mates is a place to share ideas with over 30,000 of your industry peers. A place to ask questions and get real-time answers and generate meaningful discussions. A place to build industry connections. Become an IPWEA Member to have full posting rights or view the most recent discussions. Also check out our Fleet & Plant Management Open Forum.