Leasing vs. Buying for Your Corporate Fleet: Which is the Better Investment?
So, you want to build a corporate fleet of distinction, high quality and timelessness - where do you start? Utilising car hire system and vehicle rental software can streamline this process.
Most new fleet operators will look at leasing or buying their cars, and there are plenty of pros and cons for either choice.
We know most corporate fleet operators will make a cost-conscious choice, especially when it comes to luxury or new model cars, but good fleet operators should have a full view of the market.
They need to be aware of the critical differences between leasing and owning a corporate fleet, and how each path represents a certain type of opportunity for the discerning fleet operator.
Leasing vs Buying Comparison
So, what is the difference between leasing and owning a business car fleet?
Leasing -
Leasing a fleet is where a vehicle rental company or corporate fleet owner will not purchase cars outright but will lease them through a car leasing arrangement for a predetermined amount of time.
The benefits of leasing a corporate fleet are:
Lower upfront costs and predictable monthly payments
Less maintenance and repair costs
In most cases, access to newer cars
The drawbacks of leasing a corporate fleet are:
Mileage restrictions
Termination fees
No equity and no ownership
Buying -
Buying a fleet is where corporate fleet owners will buy a fleet from a dealership or fleet management company outright.
The benefits of buying a corporate fleet are:
High rate of equity for future sales
No mileage restrictions
No lease termination fees
The drawbacks of buying a corporate fleet are:
High upfront costs
Maintenance and repair costs
Varying interest rates for repayments
Sometimes limited choice of stock
Corporate fleet requirements in a troubled vehicle rental market.
The vehicle rental market has been on a real journey over the last few years.
COVID changed the rental game - it pushed operators into digitising fleet management via tools such as keyless entry (which customers loved) or GPS telematics integration (which operators loved), but it also created novel problems as legacy rental operators digitally transformed without a clear strategy.
The semiconductor shortage (not to mention geopolitical tensions and rising raw materials costs) has also continued to hamper new car production - “the car rental industryhad a 62% decline in new vehicle registrations during the first nine months in 2022” - which has put added pressure on corporate fleets to source vehicles - especially EVs and in-demand vehicle types - from new production channels, or delay expansion of fleets or renewal of vehicles.
But when nearly a third of all car rentals are corporate customers, its vital business fleet operators understand how to diversify fleet purchasing. A major component of that is understanding whether leasing a fleet or buying a fleet is the right option for an in-demand service.
Rentals are on the rise, but supply isn’t keeping up with demand.
Car rental is on the rise, so the time is absolutely right to reconsider how best to build a fleet on firm financial footing. But, as we highlight below, the economics of fleet management are changing.
The most important thing to remember is that across the car production, rental, leasing and buying market demand will continue to outweigh supply in 2023 and beyond.
This has a unique impact on corporate fleet management that echoes but doesn’t completely copy the wider rental market.
People want to rent cars, and corporate fleet managers especially want to diversify their travel options. But, it's never been harder to guarantee vehicle type or quantity on demand via one particular “purchasing” option.
Also, customer needs are changing. A pattern has emerged over the last few years that has put pressure on rental operators to digitise and flexibly manage fleets in light of changing customer and market expectations (see: keyless entry, dynamic pricing, DVLA lookupetc)
The result?
Without fully understanding the purchasing options available, and the reach of digital solutions that help secure and manage that fleet, corporate fleet managers and business owners everywhere will not be able to take advantage of improving business transport options and meeting customer demand head-on.
How Coastr helps corporate fleet operators.
As you can see from the analysis above, operating a corporate fleet means taking stock of a range of critical business inputs, from budgeting to vehicle lead time.
Above all else, it requires a solid fleet management strategy.
No matter whether you own or lease your fleet, you need an effective fleet management tool to look after it. This is where Coastr's vehicle rental software steps in.
Our market-leading telematics and fleet management features - such as our Fleet Management app, contactless car rental solutions, vehicle tracking, remote immobilisation and white label app - guarantee an agile, paperless, fully accessible fleet management solution built for the modern corporate fleet management operation.
To new corporate fleet operators looking at leasing or buying a fleet, we urge you to build a strategy that meets the needs of your customers and your operational goals - and by collaborating with Coastr and utilising our car rental software, you can always be assured that your fleet is in good hands.
Corporate Fleet: Is Leasing or Buying the Smarter Investment?
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