According to the American Transportation Research Institute (ATRI), the overall economy is weighing most on fleets’ minds heading into 2024, especially in areas like fuel prices, driver shortages and the impact continuously high interest rates will have on markets. With this in mind, Fleet Advantage again recognizes January Financial Wellness Month as a time for organizations with transportation fleets to check in on the status of their financial health and the strategies shaping their bottom line. To schedule your complimentary fleet financial wellness check, click here!
Complimentary Fleet Analysis – Including Lease vs. Purchase
As an innovator in specialty financing, fleet data analytics, fleet management services, and life cycle cost management, Fleet Advantage regularly works with America’s Top 100 fleets to ensure they are operating with the greatest efficiencies in mind, along with the lowest Total Cost of Ownership (TCO). As such, this month the company is offering organizations a complimentary analysis of their fleet operations, as well as financial metrics including a lease versus purchase analysis that is customized for their business.
The company offers a full suite of data analytics to determine the best finance option for their operation. This includes the decision to lease trucks with shorter trade cycles, and also continuously reviews different lease structure types such as an unbundled lease versus a full-service lease, which locks organizations into a long-term contract with no flexibility on costs for fuel and maintenance even when market conditions fluctuate.
The latest Lease versus Purchase Analysis of heavy-duty truck equipment shows significant operational and financial benefits for organizations. It is evident that there is an after-tax advantage to leasing a tractor of $9,798 per truck. The analysis considers a 2025 model year Daycab with $132,870 equipment cost on a 5-year term. The model assumes 60% bonus depreciation, a resale value of 24% at the end of five years, a state sales tax of 6%, a 21% federal tax rate, a lease rate factor of 1.541%, and a discount rate of 6.5%. The discount rate is a function of the current market forces. The total cost associated with purchasing an asset includes the upfront cost of the equipment, depreciation expense, tax expense, and the resale of the asset at the end of its useful life resulting in a net present value of $95,321. The total cash outflow associated with leasing an asset are the fixed annual costs in the form of lease payments including state sales tax resulting in a net present value of $85,523.
Financial Outlook for 2024
Many organizations are paying close attention to the direction of the economy entering 2024, especially with higher interest rates and talk of possibly a reduction of rates. According to Fleet Advantage, regardless of the climate for cost of financing, fuel, and equipment investment, fleets need to ensure they have a strategic, multi-year procurement plan based on proven data and analytics. This plan ensures each organization is positioned to maximize their TCO no matter the condition of the economy.
“It is imperative for us to steer our clients and the industry toward sustainable success by strategically navigating the financial currents that shape our industry,” said John Rickette, CTP, Vice President of Portfolio and Manager of the Transaction Management Team at Fleet Advantage. “A key element in this journey is a comprehensive evaluation of organizations’ financial goals and overall fiscal health. Understanding the TCO is paramount. By meticulously scrutinizing every aspect, from acquisition to maintenance and disposal, we position ourselves to help fleets make informed decisions that drive efficiency and optimize resources.”
To schedule your complimentary fleet financial wellness check, click here!
