Ask Your Mates Open Forum

Light Vehicle Fleet - Own or Lease

  • 1.  Light Vehicle Fleet - Own or Lease

    Posted 10 September 2018 19:56
    ​Hi Fleet Manager colleagues,

    With your light vehicle fleet, do you own them of are you leasing them?

    What was involved in making such a decision?

    Pros and cons and so forth..

    Is it possible to share your findings and reports of some form?

    Thanks


    ------------------------------
    Vili][Masibilo
    Gympie Regional Council
    Manager Workshop, Fleet & Depot Ops Manager
    vili.masibilo@gympie.qld.gov.a
    07 - 5481 0877,Gympie,QLD
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  • 2.  RE: Light Vehicle Fleet - Own or Lease

    Posted 11 September 2018 21:17
    ​Vili,

    As a generalisation I expect that you will find that financing (particularly lease financing) will reduce the value of the agency. Where no income tax is paid (ie LGAs) this effect is increased.

    An exception to the above may be where it might be considered useful to introduce novation arrangements to protect the organisation from stranded vehicles and capital loss.

    I suggest you consider using discounted cashflow techniques to:
    Determine the net present value of a purchase decision.
    For that purchase then model in the same way the financing alternatives.
    Create perpetuities from the above (value of outgoings if repeated indefinitely).

    Your finance department can help you with how to build discounted cashflow models.

    This type of modelling will help you determine the value of net outgoings associated with capex. The smaller the net outgoings (NPV) the greater the value of the agency (cet.par.).

    Rgds Laurie


  • 3.  RE: Light Vehicle Fleet - Own or Lease

    Posted 11 September 2018 23:13
    Vili

    Here is a start point for your decision.  Qld Treasury guidelines set out the framework for your decision.  The IPWEA Plant and Fleet Management Manual Section 4 also provides some guidance.

    Cheers
    J

    https://www.treasury.qld.gov.au/resource/queensland-leasing-approval-policy-public-sector-entities/

    ------------------------------
    Jon Charles
    CED Consultants
    jon@cedconsultants.com.au
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  • 4.  RE: Light Vehicle Fleet - Own or Lease

    Posted 19 September 2018 21:50
    ​Essentially Councils will always access funds at a lower interest rate than any leasing company who is also making a profit, so the lowest cost method of financing the purchase should be capital purchase with Council funds (whether it be loans or rates).  If your internal rates are appropriate and recovering the depn etc, you should always have sufficient funds for renewal.  But sometimes cash and debt can be an issue which forces you to look at leasing.  If this is the case then you may have bigger issues to worry about!!!!!!

    Leasing (Novated) is a satisfactory method when you look at the private use/contract cars as it is the employee's choice and off the Council books.


  • 5.  RE: Light Vehicle Fleet - Own or Lease

    Posted 20 September 2018 21:54
    Hi Vili

    The financing decision is a fairly standard CFO type decision. In my experience the real costs that cause escalation in fleet operatios are crashes and unauthorised use where a Hi Lux is taken on a fishing trip on the weekend.

    Also you can lay off some of the costs by making sure that you are claiming Fuel Tax Credits for use on non-public roads. I imagiane that some if your vehicles around Gympie will do a fair bit of non-tarmac road fuel usage so don't leave that one on the table!

    Regards




    Michael