What type of lease is right

for your organisation?

Mace Hartley, General Manager

Smartfleet Management

Introduction

Leasing is often said to be the simplest way to acquire your transport needs; is this TRUE?

Contents

• Types of leases

• Reasons for leasing

• Cost components of an operating lease

• Advantages of leasing

• Disadvantages of leasing

• Summary

Types of Leases

Operating Lease

Fully Maintained

Partially

Maintained

Closed

Ended

Open Ended

Finance Lease

Novated Lease

Reasons for Leasing

Cashflow Balance Sheet

Cost Control

Buying Power

Knowledge & Resources

Hassle Free Risk

Reduction OH&S

Vehicle Purpose

Reasons for Leasing

Proposed Accounting Standards will impact the balance sheet of companies that use operating leases.

• On the table since 2006

• Joint project between IASB & FASB

• Most likely exclude leases <12 months

• Will impact debt ratio’s, equity ratio’s and other financial covenants

• Will increase compliance and governance costs

• Still in progress and unlikely to be implemented prior to 1st July 2016

Balance Sheet

Reasons for Leasing

• Often fleet management becomes the responsibility of procurement

• Great at purchasing however limited resources and experience with management of:

• Registration & Infringements

• Repairs & maintenance

• Fuel & E-Tag

• Lack of systems to centralise and control expenses

• Single person dependency

• Buying power of the collective

Knowledge & Resources

Cost Control

Buying Power

Reasons for Leasing

Vehicle Purpose:-

• Operating leases normally used for tool of trade vehicles where majority of usage is business use

• Novated leases used where there is little or no business usage

• Novated leases provide staff with benefits and choice of vehicle

• Novated leases generally produce expense saving in payroll tax

Vehicle Purpose

Reasons for Leasing

Risk Reduction:-

• Uncontrolled costs are capped by choosing either a fully or partially maintained operating lease

• The risk of losing fleet expertise due to staff movement is reduced by outsourcing your fleet management

• Engaging a fleet management company – registration renewal’s

• Any disposal cost and potential loss managed by the operating lease company

Risk Reduction

Reasons for Leasing

Occupational Health & Safety:-

• “The operating lease company owns the vehicles so they have the OH&S responsibility for regularly servicing it”

• “We allow our employees to salary package their vehicle so they have the OH&S responsibility for regularly servicing it”

OH&S

• An organisation cannot transfer or outsource its responsibility for providing a safe working environment for its employees

Cost Components of Operating Lease

Lease Repayments

Residual Value

Vehicle Cost

Special Equipment

Excess Fair, Wear & Tear

Costs

Running Costs

Interest Rates

Excess Kilometres

Excess Fair Wear & Tear

• How do your drivers treat your vehicles?

Advantages of Leasing

• No major capital outlay

• Quoting, ordering and disposal outsourced

• Known monthly costs

• Access to large buying power

• One bill for all vehicles

• Leverage knowledge of leasing company

• Management of servicing, registration and potentially insurance

outsourced

Disadvantages of Leasing

• How do you manage pool vehicles?

• How do you manage your non-leased vehicles?

• Do you know if vehicles are being serviced?

• Who is managing your infringements?

• Limited access to reporting and what about non-leased vehicles

• Extra fees if excess kilometres travelled

• Extra repair cost for excess fair wear & tear

• Early termination fees if your business needs change (interest and

movement in residual risk)

Summary

• Convenience equals cost!

• You can’t outsource your OH&S responsibilities!

• Multiple vehicle ownership makes managing your fleet

difficult!

• Refer AfMA reference library for assistance with

suggested policies

What Do You Think?

Leasing is often said to be the simplest way to acquire your transport needs; is this TRUE?

My View

Novated Lease

Finance Lease

Op Lease – Fully Maintained

Op Lease – Partially Maintained

Simple

Complex

Expensive Cheapest

Owned Fleet

Survey Results

Which state do you live in?

Which sector best describes your company?

Which title best describes your role?

How many vehicles are in your fleet?

What best describes how you fund your vehicles?

Survey Results

Which state do you live in?

Survey Results

Which sector best describes your company?

Survey Results

Which title best describes your role?

Response Chart Percentage Count

CEO, CFO, COO, GM 15.4% 4

State Manager 7.7% 2

Fleet Manager 26.9% 7

Procurement Manager 7.7% 2

Fleet Coordinator 11.5% 3

Other 30.8% 8

Total Responses 26

Survey Results

How many vehicles are in your fleet?

Survey Results What best describes how you fund your vehicles?

Response Chart Percentage Count

Mostly Operating Lease with some Owned Vehicles

32.0% 8

Mostly Operating Lease with some Financed & Owned Vehicles

4.0% 1

Mostly Owned with some Operating Lease Vehicles

40.0% 10

Mostly Owned with some Operating Lease & Other Financed Vehicles

24.0% 6

Total Responses 25

If you want more details, please contact: Saki Polychronopoulos National Sales Manager www.smartfleetaustralia.com.au PO Box 6738, St Kilda Road Central VIC 8008 Level 8, 11 Queens Road, Melbourne VIC 3004 saki.polychronopoulos@smartfleetaustralia.com.au M +61 403 613 749 | D +61 3 9998 3225 | F 1300 764 522