VEHICLE LEASING Who’s Offering What – In the vehicle leasing business?

A notable trend has developed in corporate New Zealand.
Companies are less inclined to want working capital tied up in bricks and mortar. Fewer and fewer enterprises own the office towers and buildings in which their headquarters are housed. More and more of them are inclined to sell up to property investors and lease the buildings back.
It’s no different with motor vehicles, another major asset – and potential liability – on company balance sheets. Leasing fleet of vehicles frees up even more of that so-called “dead money”, and as long as lease agreement appropriate to corporate’s wants and needs is negotiated, there is an opportunity to save money as well.
Busy managers and executives have more time to focus on the management decisions that really matter and which directly relate to their core business.
So what are the options available when leasing vehicle or fleet?
Custom Fleet New Zealand’s website www.customfleet.co.nz offers succinct summary of the various vehicle leases available in the market. The options are particular to Custom Fleet but can be taken as read across the industry.
Here is handy snapshot of some of the standard options available.
A fully maintained operating lease allows all the risks associated with ownership of the vehicle to remain with the lease company. Because the client is not responsible for the residual risk, the vehicle is handed back at the end of the lease period.
Finance leases, which are similar to vehicle rental agreements, allow the lessee to rent the vehicle for fixed period. The applicable rental is fixed for the term of the lease, with residual value payable by the lessee at the end of the lease.
Consecutive leases are an extension of the fully maintained operating lease, with the additional flexibility of topping up by further year or negotiating further lease.
A sale and leaseback agreement provides for the leasing company to buy client’s existing freehold fleet. The fleet is then leased back to the client on fully maintained basis for agreed term and kilometre limits.
Honda Lease Direct general manager Gil Kennell says vehicle leasing is becoming increasingly popular with people who are not good savers. Others are more inclined to put their money into residential property and simultaneously remain free of the pitfalls of vehicle ownership.
“You can lease car with one advance payment of $500 or $600. It doesn’t matter what the car is worth in three or four years’ time, you just simply hand it back,” says Kennell. The lessee knows exactly what he or she is paying every month. Maintenance is included, but not petrol and insurance. Neither is damage to the vehicle beyond reasonable wear and tear.
Kennell, who has been with Honda Lease Direct almost from its inception in 1999, says the company has surprisingly high proportion of customers – about 35 percent – who are medium-to-high net-worth individuals.
Companies naturally make up the balance. “They are better off to have their money in stock, then turn the stock over,” says Kennell.
“Even if you only turned the stock over six times year and made 10 percent each time, you’d be about $40,000 year ahead.”
Companies generally own all their cars or lease them all. Sometimes they test the water by leasing few, or by leasing vehicles with high mileage.
The maximum lease period is 45 months. It used to be 36 months. Unsurprisingly, the longer lease term has been popular, because longer term leads to lower overall rate.
A one-year lease might be $800 to $900 month, six-month lease more than $1000 month. 45-month lease will save lessee about $30 month compared to the $550-$600 month it would cost them for 36-month lease.
Kennell says his company always recommends the 45-month lease to clients, even though it has vested interest in shorter-term agreements. “It’s the better way to go because it’s costing them less. And the person choosing the car is going out to the market less frequently.”
Citroen NZ is niche player in the leasing market on the verge of re-evaluating its strategy with view to increasing its market share. Marketing manager Mark Patterson says all of Citroen’s products are open to lease agreements.
Citroen dealers work individually with lease companies. “You’d go into the dealer, they’d discuss whatever your requirements are, they would then contact the lease company if you hadn’t already done so, and then work out an agreement,” says Patterson.
Most of Citroen’s leasing agreements are for two to three years. “We’re more into selling ourselves than having lot of people come in and want particular car,” he says.
Avis New Zealand is best known as rental car company but offers leasing product, called Minilease, tailored to short-term lessees. Marketing manager John Devaney says it suits people on short-term relocations, and especially people working away from home on contract. It’s 30-day renewable lease, which technically can be rolled over indefinitely.
“It’s like very, very long rental, but because of the term, the rate becomes less and less every month,” says Devaney.
Pricing is worked out on daily rate of about $30 day, but it never really reaches point where the rental is comparable with normal leasing costs.
“If someone has been sent to Auckland for particular project for three months, this is the kind of product which will suit them, because leasing company isn’t going to be too interested in product like that for that period. Otherwise it’s going to be expensive.”
Owen Kinnaird, general manager sales and marketing for FleetSmart, Cardlink Systems’ fleet and fuel management solutions business unit, says his organisation, which has about 10,000 vehicles under full-time management, has added sourcing element to its core fleet management function during the past year.
“It’s benchmarking exercise for our customers from vehicle selection to lease deals or finance arrangements, right through to fuel, tyres, the works. It’s almost brokering service without brokering fee, using our knowledge and competencies to come up with the best fleet-supply mix. We source, we manage, and the management is day-to-day, done by dedicated fleet controllers,” says Kinnaird.
Nine staff are dedicated to specific fleets, whose management is backed up by Fleetsmart’s automated billing system, which consolidates all fleet-related costs, and pays them on behalf of the customer.
“We can keep track of the whole-of-life costs of running specific vehicle with all the costs allocated,” adds Kinnaird.
Kinnaird’s clients come to FleetSmart because they don’t understand their fleet costs, and they want to reduce them. “A lot of the fleet management roles that are traditionally fleet-only are now being absorbed back into facilities management. So fleet managers are becoming building managers and property managers as well. That’s driving lot of our growth, because people say they want to consolidate these roles into one,” he says.
These clients need an outsource partner to assist in the daily operation of the fleet so they can be freed up to focus on other priorities.
FleetSmart charges on per-month, per-vehicle fee. company running its own 100-vehicle fleet might have three people involved in fleet control and administration. Under FleetSmart’s watch, the costs fall to less than the equivalent of one person.
“Our first option is consulting so customers can get to know us. That’s lot to do with lease comparisons, vehicle comparisons, and understanding the whole of life of different types of vehicles and lease arrangements,” says Kinnaird. “Once we’ve got that in place we try to provide an integrated fleet management solution where we outsource or we provide an outsource solution.”
Vehicle management fleet leasing company LeasePlan NZ is foundation sponsor of Green Fleet, the Sustainable Business Network initiative aimed at reducing the impacts of vehicles on our environment and people.It has d