High Mileage Leasing: Why it Might be Right for Your Company
When most people think of leasing, they think of low mileage allowances. This is because nearly every car dealership advertisement is trying to lure retail customers in the door with rock-bottom pricing. In order to do this, they advertise lease deals with 12,000, 10,000, or sometimes even fewer annual mileage allowances. For someone who doesn’t do much driving, and mainly stays local, the “ultra-low mileage” lease deals may work out. However, for those of us in the business world, who have people out on the road driving 20,000, 30,000, or even 40,000 miles per year, it’s a non-starter. But what if I told you that the more miles you drive, the more sense it makes to lease? In this article, we’ll discuss the concept of high mileage leasing, and why it might make sense for your company to explore.
What is a High Mileage Lease?
As a result of dealer advertising, many people think that leases can’t be written for more than 12,000 annual miles. This is a myth, especially when talking about the business world. The truth is that leases can be written for whatever terms fit your company’s needs. If you have drivers who travel 50,000 miles per year, a high-mileage lease can be written to accommodate them. Fleet management companies specialize in creating lease programs for vehicles that travel well above the standard 10,000 – 12,000 annual miles advertised by dealerships.
Is High-Mileage Leasing Expensive?
When compared to purchasing, high mileage leasing often works out to be the better deal. Why is this? With a high mileage closed-end lease, you’re only obligated to pay for the portion of the vehicle that you use. Once your term is up, you simply hand over the keys and walk away. You have no further responsibilities.
If you elect to purchase your vehicles, you either must outlay a large amount of cash, or finance. Both carry drawbacks when talking about vehicles that will be driven for extensively.
If you pay for the vehicles outright, you’ve now tied up the entire cost of the vehicle, and as a result, have less cash on hand to re-invest into the business or respond to opportunities that may arise. Additionally, you’re outlaying cash towards an asset that is going to depreciate rapidly, especially in a high-usage scenario.
If you elect to finance the vehicle, the high usage is going to place you in a scenario where you’re severely upside down on the loan, and are thus forced to retain the vehicle longer than you may want, or cough up enough cash to cover the difference between the remaining amount you owe, and the actual value of the vehicle.
Both situations are not ideal, and severely decrease flexibility when managing your fleet.
What if I Still Exceed My Mileage Allowance?
There are times where even high mileage allowances get exceeded. This is where working with a respected fleet management company pays dividends. Unlike dealer leases, where excess mileage fees are viewed as a source of profit, a respected fleet management company will only be looking to recover the additional depreciation of the vehicle. Where a dealer may charge 25 cents or more per excess mile, a fleet management company may charge as little as 8 cents per mile. Additionally, Motorlease has a program that allows our clients to pool their mileage, getting credit for vehicles returned under mileage to offset any vehicles returned over mileage. It’s a unique offering in the industry that’s designed to show our clients that we don’t view our relationship as simply transactional, but as a true partnership.
How Can I Find Out More Information on High Mileage Leasing?
For more information on whether or not high mileage leasing might be right for your company, please don’t hesitate to reach out to us at 800-243