Lease returns – Why it is a sensible alternative in procurement management
Not every company can afford to outfit its fleet entirely with purchased vehicles. So, many choose to lease. When the lease expires, the lessee can keep the cars by paying their residual values or give them back to the leasing company. We are going to explain the advantages of leasing and why lease returns may be an economical alternative.
What are lease returns?
Lease returns, as the name suggests, are vehicles that are returned upon expiration of a leased period, lasting between 12 and 60 months. The leasing company has two options: selling it at its residual value or taking it back and offering it for sale as a lease return.
The leased vehicle is put up for sale as a used vehicle for private or commercial use. While it is mostly purchased by the self-employed and business owners, private individuals are also increasingly considering this option as a way to acquire cars at a low price. In the course of cost optimization and fleet flexibilization, the commercial used car market has been on the rise for years. Especially “young used” cars, i.e., used cars that are less than 5 years old, are experiencing a surge in demand.
Advantages of a lease return
The image of the poorly maintained company car returned with a lot of mileage on it is a thing of the past. The used car market is booming and not just since the Covid crisis, which has pressured companies to scrutinize the various costs associated with their fleets. Small fleets seeking to expand their fleet but limited by a tight budget are taking advantage of lease returns.
Moreover, lease returns offer other benefits to fleet managers:
Good prior knowledge: You know the vehicle because it was previously in your possession. You are aware of whatever damages, the last maintenance checks, etc.
Complete service history: Full documentation of repairs and maintenance in your hands.
An upmarket company vehicle acquired at an attractive price: Fleet managers can run their fleets cost-effectively by getting upscale, well equipped cars at a cost-effective price.
Downsides of a lease return
Lease returns have disadvantages typical of used cars – impeccable external condition of the vehicle often belie the mileage accumulated. This is especially true for leased vehicles that have been used for field or mobile service.
High mileage, however, may not necessarily be detrimental. Fleets using pool vehicles and personal company cars, for example, can take advantage of cost-effective lease returns to expand their fleet at economical prices. Such vehicles can be reserved for short trips.
Whether it pays off to integrate economical lease returns into the fleet, lease new cars or buy the cars outright – and make them permanent part of the inventory, it depends on the particular orientation of the fleet and ultimately on the budget.
A lease return can be a good way to expand a fleet cost-effectively. When it comes to vehicles for field-work employees, leasing a new car may be the better option. Fleet vehicle procurement is complex and should always be carefully planned. Our software solutions are here to help you enhance the organization of your fleet while reducing costs in the long run.