Fleet vs. Consumer Leasing
You see the advertisements: a 2010 Toyota Prius for only $179 a month for 36 months with $1,999 due at lease signing. It's usually followed by an exclamation point or two. You think, "I'm going to take advantage of this fantastic deal and put 10 of my account reps in those!"
If you're new to the concept of leasing for business and perhaps even new to the world of fleets in general, you might be wondering why those consumer leases look so much more attractive than a quote that a fleet leasing company might offer you.
It's a fair question. The answer is inherent to the nature of fleet leasing versus consumer leasing.
Both consumer and fleet leases take advantage of the same benefits of leasing, in that the lessee is only paying for the portion of the car or truck actually used. This results in a lower cash outlay, offers sales tax benefits and alleviates the hassle of having to sell the vehicle at the end of the term.
From here, consumer and fleet leases diverge.
Know the Difference
A consumer auto lease is written through a dealer or an independent car lease broker and financed by a bank or a captive funding company usually affiliated or owned by an auto manufacturer. The vehicle's residual value is set by the funding company. The term is generally set from two to four years; mileage is capped at 10,000- to 15,000-miles per year and the consumer is responsible for excessive wear and tear.
There are generally two types of fleet or commercial leases, open- or closed-end. A closed-end fleet lease resembles a consumer lease in that the residual value, term and mileage cap are predetermined.
In an open-end lease the lessee assumes responsibility for the vehicle's actual market value at the end of term; therefore there are no mileage or wear and tear charges. The term is open after 12 months of service.
Both closed- and open-end fleet leases are written by fleet leasing and management companies (affiliated with dealerships or as independents) that offer a range of fleet-related services beyond the financing of the vehicle.
Extensive studies of the differences and benefits for both closed- and open-end leases, the services offered by fleet leasing companies and criteria to obtain fleet status can be found at www.fleet-central.com.