Fleet Management News & Business Info | Commercial Carrier Journal
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Light- and medium-duty focus: FINANCES Fleet Services con- ducted a survey during the 2012 NAFA Institute and Expo, it found that 46 percent of fleet man- agers expect executives to focus on cost savings when it comes time to replace vehicles. That dwarfs the 15 percent who expect their business leaders to focus on on-time delivery and service, 15 percent to focus on driver safety and 15 percent to focus on resource productivity. There are plenty of options for financing new vehicles, but which is right for your business? BY JOHN G. SMITH ill Bosco never has leased a car or truck in his life. His 1998 Ford pickup, 2001 Ford Taurus and 2005 minivan all were purchased after a careful look at the "cradle-to-grave" economics of vehicle financing. It may seem like an odd confession considering that Bosco has been in the leasing business since 1974, is the president of a consulting firm known as Leas- ing 101 and is a member of the Equipment Leasing and Finance Association's accounting committee. But there is a difference between the financial considerations when choosing a family car and those that come into play when expanding or renewing a fleet, he says. Businesses need to base their decisions on how a vehicle will be used, the different financing options that are available, the ability to use tax incentives and unique accounting objectives. Financial factors certainly will play a big role in any choice. When GE Capital Money matters B 40 COMMERCIAL CARRIER JOURNAL | JULY 2012 Leasing options Every financing model will present different accounting and tax issues, Bosco says. Unless a company wants to use its existing capital or borrow funds to purchase the vehicles, it will need to consider different leasing options. When all things are considered from a financial perspective – including use of capital and the most efficient manage- ment of federal and state income taxes – the best alternatives will be either a Terminal Rental Adjustment Clause lease or a synthetic lease, which is a TRAC lease where the tax benefits go to the lessee or fleet, he says. One of the main advantages of a TRAC lease is that it guarantees the ve- hicle's residual value. "The customer and the lender are not at odds trying to fig- ure out what the vehicle is worth," says Mark French, president of Crest Capital in Atlanta. "Often a lender thinks it's worth more than a customer. " An open-ended TRAC lease will offer fleets some valuable flexibility, says Steve Jastrow, strategic consult- ing manager for GE Capital Fleet Services. "Think of the resale market over the last four years," Jastrow says. "Four years ago, after the economic