Welcome back. It’s time for the second half of the Crossfire vehicle leasing debate and find out when a closed-end lease is a good idea. So grab some popcorn and your favorite beverage.
Vehicle Use: Vehicles that have a regular territory for driving and spend a majority of the time on the highway and not engaged in rugged use, such as sales fleet vehicles, can be good candidates for closed-end leases. This can be a slippery slope, however. The heads side of the coin is that mileage can be reasonably predictable, so a favorable mileage limitation can be agreed upon at least inception which shouldn’t leave you open to overage. Also, sales vehicles doing mostly highway driving acquire less wear and tear, so paying dearly for these items at lease termination shouldn’t be much of a concern. The tails side of this coin is that the more miles you need in the lease, the more you’re going to shell out in your monthly payment.
Replenishment Process: When dealing with a sales fleet, it can make financial and intuitive sense to replace on a strict, closed-end basis. Sales vehicles typically accumulate miles in a hurry and surpass the 100K mark in just a few years. Getting rid of the vehicle sooner will circumvent repair and maintenance costs associated with a heavy use vehicle. Replacing vehicles every three to four years also keeps the fleet fresh and looking new, which presents a good image to current and potential clients. And on an elemental level, simply being forced to relinquish the vehicle after a certain period of time can be a good thing. If your sales fleet is on open-end leases, it’s too easy to just say “I’ll get around to it” when a vehicle should be replaced. You can’t be lazy like this in a closed-end lease.
Overage Strategy: If you’re still leery about entering into a closed-end lease due to steep overage charges, there are two offerings/negotiation points to be aware of. Instead of a mileage limitation per vehicle, you can negotiate a mileage limitation for the entire fleet. Not every vehicle in the fleet has the same mileage requirements, so high use vehicles will snag miles away from low use vehicles and the fleet can balance itself out without incurring overage charges. In a somewhat similar way, some fleet management companies will credit back unused miles as well as charge for overage. The underlying concept here is the same; balance out the fleet between high and low usage vehicles. In this situation, all vehicles will have their own mileage limitation, but instead of achieving balance through mile allocation, balance is achieved through cost allocation.
Vehicle Use: Vehicles that have a regular territory for driving and spend a majority of the time on the highway and not engaged in rugged use, such as sales fleet vehicles, can be good candidates for closed-end leases. This can be a slippery slope, however. The heads side of the coin is that mileage can be reasonably predictable, so a favorable mileage limitation can be agreed upon at least inception which shouldn’t leave you open to overage. Also, sales vehicles doing mostly highway driving acquire less wear and tear, so paying dearly for these items at lease termination shouldn’t be much of a concern. The tails side of this coin is that the more miles you need in the lease, the more you’re going to shell out in your monthly payment.
Replenishment Process: When dealing with a sales fleet, it can make financial and intuitive sense to replace on a strict, closed-end basis. Sales vehicles typically accumulate miles in a hurry and surpass the 100K mark in just a few years. Getting rid of the vehicle sooner will circumvent repair and maintenance costs associated with a heavy use vehicle. Replacing vehicles every three to four years also keeps the fleet fresh and looking new, which presents a good image to current and potential clients. And on an elemental level, simply being forced to relinquish the vehicle after a certain period of time can be a good thing. If your sales fleet is on open-end leases, it’s too easy to just say “I’ll get around to it” when a vehicle should be replaced. You can’t be lazy like this in a closed-end lease.
Overage Strategy: If you’re still leery about entering into a closed-end lease due to steep overage charges, there are two offerings/negotiation points to be aware of. Instead of a mileage limitation per vehicle, you can negotiate a mileage limitation for the entire fleet. Not every vehicle in the fleet has the same mileage requirements, so high use vehicles will snag miles away from low use vehicles and the fleet can balance itself out without incurring overage charges. In a somewhat similar way, some fleet management companies will credit back unused miles as well as charge for overage. The underlying concept here is the same; balance out the fleet between high and low usage vehicles. In this situation, all vehicles will have their own mileage limitation, but instead of achieving balance through mile allocation, balance is achieved through cost allocation.
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