Why do many people relate renting with a bad investment or something only for short-term use? A fleet rental can have a number of benefits for your business. If you were told that you could rent a vehicle meeting your specifications, with no term or money down, and maintenance included what would you think?
Here are a few questions to ask yourself when you consider renting your commercial fleet vehicles.
- Why do companies feel spending capital on vehicles is a good idea?
- Do vehicles drive a return on investment (ROI), do they drive an internal rate of return (IRR)?
- Should a company invest their capital in a process that loses them more money on a daily basis?
- Would an individual buy a house if it became less valuable every year?
There are a number of benefits to renting your commercial fleet vehicles.
Total Cost of Vehicle Operation
To do a true comparison on what is more cost effective you need to take into account all the costs of purchasing a vehicle versus just renting it. When you purchase a vehicle you generally have allocated capital to purchase it. There is an opportunity cost to consider as your capital can no longer be used for investment purposes. Then, you have the cost of the maintenance, repairs and other wear items like tires. On top of that, you have to consider the time it takes to bring the vehicle in for maintenance, the lost revenue as the staff and vehicle are unavailable, and the administrative time required to manage the payment for such services.
Most vehicle rentals include maintenance. What is not included in many cases is damages. So, if your driver runs the truck into a pole or the tailgate falls off this is clearly a damage and would fall back to you or your insurance policy.
When you rent, you are paying a monthly price that includes a mileage allowance. Additional mileage can be purchased at a set rate per kilometer.
Spare Vehicles Provided
When a rental unit goes down due to a mechanical failure or is simply in need of routine maintenance, the rental company will generally provide you with a spare vehicle for you to utilize. In some cases, if the spare unit meets your needs, you can simply keep the spare vehicle.
One of the biggest benefits of renting a vehicle is aligning your cash outflow with your vehicle need. You only pay for the vehicle when you need it – you are not committed to a term.
One of our customers previously leased 60 pickup trucks (with another company) over 4 years to help service a large industrial contract they had won. Halfway through the 5-year agreement, the industrial company decided to half the contract. Our client then had 30 trucks sitting in his yard with 1.5 years left of his rental contract.
Not all rental companies are created equal. You will need to look at monthly rates for a vehicle, mileage allowance, overages and the amount of dents, dings and scratches your fleet might incur. In Thomas Solutions case, our monthly rates are more like a lease, mileage allowance is generous as are overage charges. From a cost standpoint, we do not charge for dents, dings or scratches. We also allow our customers to customize their vehicles to suit their needs.
If you are a contractor, tradesman, industrial, commercial or construction company please contact us. We would welcome the chance to see if we can assist you with your short, medium and long-term fleet needs.