FULL MAINTENANCE CAR LEASING - A STRATEGIC PARTNERSHIP

The nineties are shaping up to be the decade of strategic business partnerships where organisations supplement their own expertise with that of outside organisations. This synergy often provides greater organisational efficiency and improved competitiveness.

Leading organisations worldwide acknowledge that the costs of depreciating assets, especially motor vehicles are often their second highest area of expenditure, after salaries. Motor vehicles tie up a great deal of capital and resource, while often incurring high operating and maintenance costs. At a time when a representative mix of 100 cars and light vans can easily consume $1.2 million annually, even small gaps in financial controls can mean that tens of thousands of dollars may evade anything more than superficial scrutiny.

For many organisations, the price of achieving the desired vigilance has been high administrative costs. Full maintenance operating leasing provides a cost effective solution to the challenges faced by organisations in relation to their vehicle fleets.

The concepts underpinning full maintenance operating leasing are essentially financial. As an alternative to external borrowing, or funding the fleet out of available capital, an operating lease provides the lowest after-tax cost. Additionally, operating lease commitments are off-balance sheet and fixed for the life of the vehicle. This ensures the streamlining of cashflows and more simplified budgetting.

The leasing company takes on the risks associated with buying, running and selling vehicles and applies the management expertise and resource to reduce costs beyond those able to be achieved by the individual fleet operator. The successful management of vehicles requires intelligence and sophistication. Utilising the leasing companies expertise and systems provides the lessee with access to economies of scale and freedom from mundane administrative tasks, thereby releasing time to carry out more productive functions.

A leasing company with considerable experience and no specific allegiance with any motor manufacturer is well positioned to provide impartial advice on vehicle selection. As an operating lease rental is directly aligned to total operating costs, it enables selection using more comprehensive criteria than capital costs alone. Alternatively, an organisation wishing to release capital tied up in an existing fleet may be able to negotiate a sale and leaseback arrangement whereby their present vehicles are bought by the leasing company and leased back to the organisation.

A full maintenance operating lease is not simply a one-off sale. It is an ongoing partnership where the leasing company understands and matches the ever-changing needs of an organisation. Selection of the appropriate partner is crucial. An organisation should be satisfied that their choice of leasing company has both the expertise and experience to implement the most effective solution. Esanda Fleet Partners, through continuous development and adaptation to changes in both fleet operational procedures and technology are one company positioned to provide the total solution.

* Rodney Ravenscroft is Esanda national general manager, Specialised Leasing and Finance

"The leasing company takes on the risks associated with buying, running and selling vehicles and applies the management expertise and resource to reduce costs beyond those able to be achieved by the individual fleet operator"

Disclaimer

The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.