Good question. Although I have no final answer, Regis, there are certain situations and conditions which will determine if pulling a Randy Moss and getting open is the wise thing to do.
Current Replenishment Process: If you stubbornly refuse to step into the 21st century and put your fleet on a management program, and insist on running your vehicles into dust, go open-ended. As Jack Leary, president of Motorlease said in Business Fleet Magazine, “The greater the percentage of the vehicle’s life that is going to be consumed by the fleet, the greater the likelihood it’ll be an open-end lease. Consuming 95% of a vehicle’s life, the consumer is better on an open-end lease.” This goes back to ownership and resale value. It makes no sense to be on a protracted closed-end lease where the dealer cashes in on the equity and you don’t.
Mileage Use: There are no mileage limitations in an open-ended lease. You can put as many miles on that wagon as there are sad country songs. If your vehicles put on an inordinate number or miles, or an unpredictable number of miles, open-end is the way to go. In terms of high mileage vehicles, even if they run a predictable pattern, it would typically be too expensive to go with a close-end lease with high mileage limitations. If your vehicles have random usage patterns, based on seasonal work or multiple driver vehicles, open is typically the best. You don’t want to gamble on a closed-end lease and risk getting hammered on overage if there’s an unexpected spike in mileage. Overage isn’t cheap in this industry.
Vehicle Use: Heavy duty use vehicles, such as pick-up trucks used for hauling, are best on an open-end lease. These types of vehicles take a regular beating and accumulate dings, scratches, and other types of war injuries. If such a vehicle was on a closed-end lease, you’d have to shell out some major cash at lease termination because you’d be responsible for all that damage. On an open-end lease, you will own the vehicle. You’ll take the hit in the resale price, but at least you’ll be getting money in, rather than sending it out. You should cycle these types of vehicles frequently anyway as if they were on closed-end leases to avoid exorbitant expenses in maintenance, repairs, yada yada yada.
Current Replenishment Process: If you stubbornly refuse to step into the 21st century and put your fleet on a management program, and insist on running your vehicles into dust, go open-ended. As Jack Leary, president of Motorlease said in Business Fleet Magazine, “The greater the percentage of the vehicle’s life that is going to be consumed by the fleet, the greater the likelihood it’ll be an open-end lease. Consuming 95% of a vehicle’s life, the consumer is better on an open-end lease.” This goes back to ownership and resale value. It makes no sense to be on a protracted closed-end lease where the dealer cashes in on the equity and you don’t.
Mileage Use: There are no mileage limitations in an open-ended lease. You can put as many miles on that wagon as there are sad country songs. If your vehicles put on an inordinate number or miles, or an unpredictable number of miles, open-end is the way to go. In terms of high mileage vehicles, even if they run a predictable pattern, it would typically be too expensive to go with a close-end lease with high mileage limitations. If your vehicles have random usage patterns, based on seasonal work or multiple driver vehicles, open is typically the best. You don’t want to gamble on a closed-end lease and risk getting hammered on overage if there’s an unexpected spike in mileage. Overage isn’t cheap in this industry.
Vehicle Use: Heavy duty use vehicles, such as pick-up trucks used for hauling, are best on an open-end lease. These types of vehicles take a regular beating and accumulate dings, scratches, and other types of war injuries. If such a vehicle was on a closed-end lease, you’d have to shell out some major cash at lease termination because you’d be responsible for all that damage. On an open-end lease, you will own the vehicle. You’ll take the hit in the resale price, but at least you’ll be getting money in, rather than sending it out. You should cycle these types of vehicles frequently anyway as if they were on closed-end leases to avoid exorbitant expenses in maintenance, repairs, yada yada yada.
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