When you buy the vehicles that make up your fleet, you are effectively taking on all the residual risk associated with those assets. When their useful lives are over, you have the responsibility and costs associated with their disposal.
Taking full ownership has other disadvantages too, particularly in an era of evolving technology (such as the growth of electric-powered vehicles) and changing regulations.
Incoming environmental regulations (for example, around diesel fuels) make the useful lives of assets less predictable. If a vehicle no longer meets the requirements established by local regulations now or in future, the risk of losing money through owning that asset is even greater.
The depreciation profile of your assets could change rapidly.
If ownership has its difficulties, the good news is that other options are available. Financing schemes, particularly leasing, can provide a more flexible way to access the vehicles you need.
Through leasing you eliminate the residual risk associated with those vehicles at the end of their useful lives. If new technologies or regulations render your fleet obsolete or uncompetitive, you can more easily change tack and begin operating more appropriate vehicles.
A low interest rate environment and a wide range of flexible lease schemes mean that there has never been a better time to consider lease arrangements as a way of operating your fleet.
Any such business decision needs careful consideration of how it supports your business model, including assessment of potential costs and benefits.
By Philip Bird, a partner at Moore Stephens, the top ten accountancy firm in their corporate finance team with a focus on advising in the transport and logistics sectors.
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