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Leasing or Renting: Which is the Best Option for Fleet Operators?

Truck Drivers: Myths and Reality

Today, fleet operators in the transportation sector have to make many complex decisions. One of the most important is to choose if they want to sign leasing or renting contract for the use of heavy vehicles. After all, an operator's fleet is, in many ways, the foundation of its business. 

And, in the transportation industry, there are few things more important than the vehicles themselves. Therefore, the choice between renting or leasing can significantly influence the day-to-day running of a business and its ability to increase profits. 

This article will examine the advantages and disadvantages of leasing and renting to help you choose the option that best suits your activity.

Leasing or Renting: Which is the Best Option for Fleet Operators?

Leasing

Leasing is similar to renting; only it applies to a more extended period. Typically, in the case of leasing, contracts are signed with an approximate duration of five years. It is the method that small and medium-sized companies usually use to dispose of vehicles.

  • Advantage: Leasing allows fleet operators to use vehicles without the need to make any out-of-pocket payments, pay hidden or unforeseen commissions, or return the credits that are usually associated with a purchase. It is possible to record the vehicle's total amount as a deductible expense (not the residual value). What's more, the entire vehicle is financed and, since the invoice is issued in the name of the entity, there is no need to advance VAT. In the case of leasing, no down payment is required. Additionally, fleet operators can account for charges within monthly expenses rather than reflecting them as liabilities on the balance sheet. This allows them to have greater liquidity to invest capital in other areas of the company, focus their efforts on your overall business model, and get rid of the worry of having to pay a down payment or credit installments of an asset (as is the case with the acquisition of goods). Most importantly, in leasing, the vehicle is not devalued. 
  • Disadvantages: Terminating a leasing contract before it ends can lead to high-cost overruns. Also, companies are forced to use the same type of vehicles for long periods, which increases operating costs if they cannot adapt the fleet's size to the circumstances when there is a drop in demand. On the other hand, in the case of organizations that want to buy the vehicles, they only acquire ownership of them once the contract has ended, limiting their possibilities until that moment. Unlike renting, fleet operators also have to take care of vehicle repairs, insurance, and maintenance, which often translates into unforeseen costs.

Renting

A leasing contract's duration is usually shorter than that of a leasing contract (generally around 36 months). Due to the great flexibility they provide, they are often very popular with fleet operators.

  • Advantage: Companies with a fleet of vehicles tend to be interested in renting for two main reasons. In the first place, renting allows fleet operators to have the most modern cars on the market, which guarantees them greater efficiency in their operations. It reduces the possibility that they will suffer delays in their activity due to possible stoppages. Maintenance. Second, rental contracts often cover things like maintenance, repairs, fines, and insurance, giving fleet operators and their employees the ability to focus on higher value-added activities. Renting can also represent certain tax advantages: in many European countries, such as Spain, The costs derived from the rental can be deducted as expenses in the tax returns before the corresponding tax agencies. Also, unlike the leasing contract, which, in general, has a long duration and establishes specific conditions, renting allows you to enjoy greater flexibility when adapting the volume of the fleet to the activity of the company.
  • Disadvantages: Rental contracts often stipulate specific requirements and mileage, limiting the company's operations or resulting in high-cost overruns if the agreement's conditions are breached. Also, once the contract has started, it is impossible to make any changes regarding the vehicles, and they cannot be purchased when it ends with leasing. On the other hand, it does not allow the subletting of cars. Although rental contracts that include maintenance can be efficient, fleet operators cannot choose which company will take care of the repairs. An error on the latter part could have a very negative effect on fleet operators' capacity to offer an excellent service to their customers.

Changes the rules of the game

It is clear that many companies do not limit themselves to these two options: some fleet operators combine leasing and renting to benefit from both models' advantages. Before deciding on the option that best suits their circumstances, companies should evaluate all possible variables and consider everything from the type of operations they specialize in, their organizational preferences, their usual routes, their peaks, and troughs. Deciding to choose between renting or leasing while continuing to work on business operations can be difficult, however.

RCC Auto Transport can provide fleet operators with a solution by offering them the best available carriers and a wide variety of vehicles that can be viewed and booked online through its digital freight platform once the vehicle or vehicles have been chosen.

RCC Auto Transport allows operators to enjoy great flexibility (either in renting or leasing mode) by giving them the option of assigning loads on demand. 

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