Businesses partner with fleet management companies specifically to save on fleet costs, which is why it can be frustrating if you are caught off guard by costs involved with cancelling a lease contract.
There are all types of fleets and every business has its own unique requirements for its fleet vehicles. A common factor, however, is that more and more companies are opting to lease vehicles rather than own them outright. This means that vehicle lease contracts form a vital part of any fleet management agreement because they are the basis for your fleet management processes.
Over the past few decades business, in general, has become more flexible. With the expansion of the ‘.....as-a-service’ approach, many companies have chosen to outsource everything from cleaning services to IT and, obviously, fleet management. Advances in technology mean that companies can outsource many business functions without the need to have someone on-site or in the office overseeing that specific task.
This, in turn, allows companies to decide which core functions they should be managing directly, and which functions are better served when managed by expert suppliers. It’s all about improving performance, but minimising cost.
A big area where businesses can minimise costs is fleet management, specifically leasing. Rather than acquiring a fleet of vehicles together with all the associated admin, maintenance, and costs, companies choose to lease vehicles. This reduces the risk to the central business and, with the right fleet partner, ensures your fleet costs don’t impact your core business.
Outsourced risk
By opting for lease agreements and full fleet management services, companies gain the benefit of a full-time fleet without adding the cost of those vehicles to their balance sheet. Instead, the fleet company takes on the expense of purchasing those vehicles and leases them to the client.
This gives companies a lot more flexibility as a vehicle lease contract is much more lenient than a purchase contract. Once you purchase a vehicle it is your responsibility and you must manage everything from licensing to fines and repairs. With a good lease contract, however, you get the benefit of the vehicles without the admin and responsibility of ownership. It makes perfect business sense.
On the flip side, the fleet leasing/management company takes on the risk of purchasing the required vehicles. As a business, the fleet management company is not only responsible for these vehicles, but also takes on the initial purchase cost, vehicle lifespan costs, as well as the predicted depreciation.
It is therefore logical that an early lease cancellation must include cancellation fees, otherwise vehicle lease companies would not be able to take on this financial risk on behalf of their clients.
A good fleet management company will be able to outline exactly how these costs are factored into the lease agreement and will actively help clients avoid cancellation fees if possible.
Check your contract
Sometimes early lease cancellations are unavoidable. There are many reasons ranging from business restructuring to sudden changes in client industries that require fleet restructuring.
Either way, nobody benefits or profits from early lease cancellations: clients are required to pay the cancellations fees and the leasing company is left with a fleet of vehicles that aren’t generating any income.
That said: at EQSTRA, your lease agreement can be reviewed and amended at any time. This allows companies to speak to their fleet management partner and rather adjust and prepare their fleet and lease agreement instead of abruptly terminating the lease and facing cancellation fees.
Remember that your fleet partner has as much interest in your business success as you do. They would much rather work with clients and help find solutions than end a lease contract. And, as mentioned before, professional fleet management companies know that every fleet is unique and will always work with their clients to find the most cost-effective answers.
EQSTRA, in turn, regularly reminds clients to review and discuss their lease agreements. This way any upcoming changes can be factored in and the lease agreement can be adjusted as necessary. It is only when all other options are exhausted that cancellation fees will be charged.
It’s a team effort
The main point to remember is that your fleet management partner is also a business partner. They are there to assist you with all fleet matters, including revising your lease contracts if necessary. This should be a completely transparent process between the lease company and the client.
With regular fleet needs and contract reviews, most companies are able to avoid lease cancellations and any associated fees. Contact us for fleet management solutions for your business.