Vehicle Fleet Definition – Entrepreneur Small Business Encyclopedia

Does your business need a company vehicle for making deliveries,
traveling to clients’ offices, carrying equipment and more? Whether
buying or leasing a vehicle is more advantageous for you depends on
a variety of factors. And if you need several cars or vans for
salespeople or delivery drivers, you may be eligible for fleet
leasing programs that can save you big money.

Leasing a small fleet of cars, minivans or pickups is easier and
more advantageous than ever. Businesses that buy or lease 10 or
more vehicles qualify as commercial fleet buyers and are given a
fleet registration number (obtained through the dealer), entitling
them to all available manufacturers’ and dealers’ fleet incentive
programs.

While manufacturers have always offered attractive discount
programs to commercial fleet buyers, there have rarely been such
programs for the small fleet lessee requiring fewer than 10 cars.
Nowadays, however, many dealers are beginning to offer their own
programs to business owners and will work with you to get your
business. In fact, some dealers can get you a fleet registration
number even if you lease only a few cars.

To decide whether fleet leasing is for you, sit down with your
accountant and estimate what it will cost, taking into account
monthly lease payments, insurance, gas, oil, maintenance and
license fees. Will you need to hire someone to manage the fleet? If
not, how will you keep tabs on regular tune-ups and administrative
matters?

You may decide it’s more economical to give your employees an
allowance and have them lease their own cars. These and other
questions should be put to your accountant before making a decision
on fleet leasing. Always check to see what the penalties are for
terminating a lease early, especially if your cash flow tends to
fluctuate from month to month.

The typical considerations of leasing are multiplied when you
lease several vehicles, so consider these possible pitfalls before
you sign on the dotted line:

  • Higher insurance coverage. Some dealers
    require you to increase your insurance coverage since they, not
    you, own the leased vehicles. Shop around for prices before you
    order your fleet because insurance can amount to a lot of money. As
    a business owner, you can probably get a blanket policy to cover
    both your business and your fleet.
  • Overextending your hard-earned bucks. Six
    shiny new vehicles in your company parking lot may boost your ego,
    but do you really need them? It’s easy to get carried away when
    ordering a fleet, so make sure you have analyzed your needs
    thoroughly before signing on the dotted line.
  • Neglecting to ask about mileage limits.
    These can vary radically and can cost you as much as 15 to 20 cents
    for each mile you drive the car over the limit. If you cover 50,000
    miles a year, it pays to buy rather than lease.
  • Failing to compare buying price with lease
    price.
    Dealers may have vehicles on the lot they are anxious to
    get rid of and will give you a special deal if you buy rather than
    lease. Ask the fleet manager to work out the figures for buying vs.
    leasing so you can see the difference, and always get it in
    writing.
  • Putting down too much money. Don??t be
    talked into a down payment that’s bigger than normal–first month’s
    payment, a small deposit and license fees.
  • Forgetting state taxes. Although some
    states, such as Nevada and Texas, have no state taxes, others, such
    as California, have high registration fees and taxes, which must be
    paid upfront when you lease a car.
  • Getting buried under the paperwork.
    Operating a fleet of vehicles, however small, requires at the very
    least keeping track of mileage and expenses with a running report
    on each vehicle so you can budget your cash outlay.

Once you’ve decided fleet leasing is for you, here are some
additional questions to ask:

  • Do you need minivans, pickups or passenger cars? Determine what
    each vehicle will be used for.
  • Do you need to specially equip the vans and pickups?
  • What options do you need on each vehicle? Air conditioning and
    radios are probably needed, but leave the fancy options off the
    price tag.
  • How much trunk or cargo space is needed to accommodate your
    product?
  • How many miles a year will you clock? Most leases allow you
    12,000 to 15,000 miles annually before charging you by the
    mile.
  • Can you lease different types of vehicles from a single
    manufacturer? Leasing your fleet from a single dealer is more
    efficient and economical, so shop around for a dealer that sells
    each of the types of vehicles you require rather than having to
    lease your compact pickup from one dealer and your full-sized van
    from another.
  • When visiting dealerships, ask to meet with the fleet manager.
    He or she will be much more knowledgeable about programs and
    special deals than regular floor salespeople.
  • Don’t just shop around for vehicles; shop different lenders as
    well. Get a lease quote from the dealer first, and then run it
    through your bank to check for lower interest rates.

There are several fleet financing companies that will discuss
incentive programs, modified payments and your buying needs. To
find them, ask your dealer to provide a business line of credit or
to recommend a leasing company with whom the dealer already does
business. Check out other lenders under “Leasing” in your
Business-to-Business Yellow Pages. Ask your bank about its fleet
leasing programs. Or use a buying service, which negotiates the
deal and sets up the financing. You can find these in the Yellow
Pages under “Automobile Brokers” or through auto clubs.

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