The following post was first seen on the Construction Financial Management Association February 2012 Update email. The post was written by Steve Usselman, Senior Vice President, Enterprise Fleet Management. Steve can be reached at email@example.com.
In any economy, smart business owners look for ways to ensure that their companies are running at peak efficiency. This has been even more evident in the past few years, as many companies have placed an increased importance on controlling costs. For many contractors, a vehicle fleet represents one of their largest costs, requiring a considerable amount of money, time, and resources. But, with sound planning and effective fleet management, controlling the costs of a commercial fleet is something that all contractors can accomplish.
One way to control fleet costs is to look into the different ways to acquire vehicles. Leasing cars, vans, and light duty trucks under a tailored fleet management program offers an alternative to an outright or financed purchase.
Leasing Can Increase Cash Flow
One option is to fund vehicles through a full-service fleet management company. This can make it possible to establish a separate line of credit and avoid tapping lines of credit at a bank to fund rapidly depreciating assets, such as a fleet of vehicles. Also, while traditional forms of financing or outright purchase generally require a complete payback of principal, most leases do not require a complete payback of the principal balance of the vehicle, which could have a positive impact on cash flow, depending on an individual company's cost of capital.
Cycling Extends Cost Savings
While saving money through the acquisition of vehicles is one way to cutting costs, contractors must also consider long-term decisions, such as how to save money on the back end of a vehicle’s life cycle. The goal is to minimize the net depreciation and operating costs of the vehicle by managing its life cycle. Many fleet services companies have vehicle replacement cycling systems that ensure vehicles are replaced at appropriate intervals to achieve optimum performance and resale value, and remarketing professionals who can help business owners take the guesswork out of this process.
No matter which method of vehicle funding your company chooses, there are many other benefits of fleet management – including saving time, decreasing management responsibilities, and making it easier to monitor fleet operation.
To understand more about lease versus own options or to consult professionals on other finance related matters, please contact the construction professionals of McKonly and Asbury, LLP.