When it comes to managing a commercial fleet, one of the most important decisions is whether to buy or lease fleet vehicles.
Each option comes with its own set of benefits and challenges, so it’s critical to evaluate your specific needs and financial goals as a fleet manager.
In this article, we’ll dive into the pros and cons of buying fleet vehicles, explore the difference between buying and leasing, and offer tips to help you make the best decision for your business.
Pros of Buying Fleet Vehicles
Purchasing fleet vehicles outright can offer a variety of advantages that can positively impact your fleet’s long-term performance and bottom line.
Let’s explore some of the most compelling benefits.
Potential cost savings
One of the biggest pros of buying fleet vehicles is the potential for long-term cost savings.
While the upfront costs of purchasing are higher than leasing, owning the vehicles can prove to be a smarter investment over time. Once the vehicles are paid off, you eliminate monthly payments, which can lead to significant savings over the vehicle’s lifespan.
This is particularly beneficial for businesses that plan to keep their vehicles in service for many years.
Moreover, buying a fleet allows companies to take advantage of fleet pricing, where dealerships offer discounts for purchasing multiple vehicles. This helps reduce the total cost of acquiring vehicles compared to buying individually or leasing.
Total control over the vehicle
When you own your fleet vehicles, you have total control over how they are used and maintained.
Leasing typically comes with restrictions, such as mileage caps and penalties for excessive wear and tear. By owning the vehicles, your business can use them as needed without these limitations, making it easier to optimize them for your specific operations.
Additionally, you have full control over the vehicle’s maintenance schedule. You can decide when to perform repairs, upgrades, and maintenance, without having to coordinate with a leasing company’s schedule. This allows for greater flexibility in keeping your fleet in top shape.
Potential Tax Advantages
Another important advantage of purchasing fleet vehicles is the potential for tax benefits. In many regions, businesses can take advantage of tax incentives like depreciation deductions and Section 179 expensing.
These deductions allow companies to write off the cost of the vehicle over several years or take a larger deduction upfront, reducing the taxable income of the business.
For example, the Section 179 deduction in the U.S. allows businesses to deduct the full purchase price of qualifying vehicles, up to a certain limit, in the year they are put into service. This can significantly lower the overall tax burden for companies that purchase fleet vehicles.
Customization
When you buy your fleet, you can customize the vehicles to your specific needs.
Whether it’s adding specialized equipment, branding the vehicle with your company’s logo, or making modifications to improve functionality, owning the vehicle gives you the freedom to make adjustments without permission from a leasing company.
Customization is especially valuable for businesses with unique operational needs.
For instance, a construction company might need vehicles outfitted with special storage racks or heavy-duty suspensions, while a delivery company may need refrigerated trucks or enhanced GPS systems.
Cons of Buying Fleet Vehicles
While buying fleet vehicles has many advantages, there are also several challenges and drawbacks that must be considered.
Here are the main cons associated with purchasing fleet vehicles.
Significant Upfront Investment
One of the most significant downsides of buying fleet vehicles is the high upfront cost.
Purchasing a fleet of vehicles requires a substantial capital outlay, which can strain cash flow, particularly for smaller companies. While there may be long-term savings, the initial expense can be a hurdle for businesses that need to conserve working capital.
Additionally, businesses that finance their fleet purchases will need to account for monthly payments and interest costs, which can add up over time.
Depreciation
All vehicles lose value over time, and fleet vehicles are no exception. The moment you drive a new vehicle off the lot, its value begins to decrease.
This depreciation can be a financial burden when it comes time to sell or trade in the vehicles.
Vehicles that are heavily used or driven in tough conditions (such as in the construction or delivery sectors) often depreciate more quickly due to wear and tear, making it harder to recoup their value later on.
Risk of Obsolences
Fleet vehicles, especially those with technological components, can become obsolete relatively quickly.
New advancements in fuel efficiency, emissions regulations, and driver-assist technologies mean that older vehicles may no longer be as competitive or compliant with new standards.
This is particularly concerning for industries that rely on cutting-edge technologies to improve efficiency and safety.
For businesses that buy their fleet vehicles, the risk of obsolescence may mean frequent upgrades or replacements, which can be costly.
Potential Maintenance Issues
When you own the vehicles, you’re responsible for all maintenance and repair costs. As fleet vehicles age, these costs tend to rise, especially for high-mileage vehicles.
Regular wear and tear, unexpected mechanical problems, and the need for frequent servicing can add significant expenses to the operation.
Leased vehicles often come with maintenance packages or warranties that cover repairs, which can reduce the hassle of managing repairs. Without this option, owning a fleet means staying on top of preventive maintenance to avoid costly breakdowns.
Buying vs Leasing: Choosing the Right Option
Now that we’ve covered the pros and cons of buying fleet vehicles, how do you decide between buying and leasing?
The decision ultimately depends on your fleet’s size, budget, and long-term business goals.
Buying is often a better choice for companies that can manage the upfront investment, plan to keep their vehicles for a long time, and need the freedom to customize their fleet.
However, for businesses that prefer lower upfront costs, flexibility, and less responsibility for maintenance, leasing may be the better option.
5 Key Tips on Purchasing a Fleet
When purchasing fleet vehicles, no matter whether you’re buying a used fleet car or new vehicles, it’s essential to have a solid plan in place.
These five tips will help you ensure that your investment in fleet vehicles pays off:
- Plan for your needs – Don’t buy more vehicles than you need or vehicles that don’t suit your operational requirements. Choose vehicles based on the specific demands of your business.
- Evaluate the total cost of ownership – Look beyond the sticker price. Consider fuel efficiency, maintenance costs, insurance, and resale value when evaluating vehicles.
- Take advantage of fleet pricing – Work with dealers to secure fleet discounts. Buying in bulk usually comes with significant price reductions.
Prioritize vehicle safety features – Investing in vehicles with the latest safety features can reduce accident-related costs and improve driver safety. - Review financing and tax benefits – Explore financing options and research tax incentives to minimize the financial burden of buying fleet vehicles.
By considering all of these aspects, you can create a fleet that will help you achieve your business goals.
How FleetPal Can Help
Managing a fleet is complex, especially when you own the vehicles.
Fleetpal’s reliable fleet maintenance solution can help you manage everything from vehicle maintenance schedules, parts inventory management, to driver management.
With Fleetpal’s tools, you can ensure that your vehicles are running efficiently, reduce downtime, and plan for preventive maintenance – all of which contribute to making fleet ownership more manageable.
FleetPal helps you keep track of every aspect of fleet management so that owning your fleet becomes a smooth and efficient process.
