After premises and wage costs, vehicles are often construction companies’ No.3 expenditure item. Long-term rental (or LTR) offers a way of managing your balance sheet and having regular access to new vehicles. As company fleet managers are finding it more and more difficult to navigate a maze of increasingly complex tax systems and new vehicles powered by alternative energies, LTR provides a number of answers to these challenges.
After property and wages, vehicles are generally the third largest item of expenditure for companies that operate fleets (even of smaller size) in the construction and environmental sectors. The construction sector’s largest firms were quick to see the benefits of long-term rental, but now SMEs – and even very small companies – are now taking advantage of the LTR concept. A major advantage is that it avoids sinking cash into the acquisition of a fleet of vehicles, provides constant access to recent, well-maintained equipment and offers a precise figure for the “vehicles” budget in the form of rental payments. The latter payments are incorporated into operating expenses, with resulting benefits for the company’s balance sheet. In addition, the rental company becomes the single point of contact for managing all vehicles, with centralised invoicing and service levels that are predefined at the time of contract signature.
A simple system
Long-term rental (LTR) for vehicles is simple: a vehicle (car, utility or truck) is supplied in return for a monthly rental payment including financing and services (maintenance, tyres, fuel, etc.). This option is particularly attractive in cases where the expected rental duration exceeds 24 months. When signing the contract, the client selects the desired rental term and mileage; at the end of the contract, the vehicle is returned without the need to worry about resale. This system represents a shift from a model based on vehicle ownership to one based on vehicle usage. LTR is particularly advantageous for high-mileage users as it mitigates financial loss; vehicles depreciate by 25-30% of their value in the first year and by about 50% after three years. And with high mileage, this figure is even greater.
An attractive solution, regardless of size
Previously the preserve of large companies, LTR is now of interest to all companies, regardless of size, because of the flexibility it offers – a crucial consideration for smaller businesses. This is because, in addition to the advantages already mentioned, there are now other aspects which need to be considered. In an increasingly complex financial environment in a state of constant change (corporate vehicle tax, emissions bonus/penalty systems, WLTP, etc.) and the increasing availability of vehicles powered by alternative energies (hybrid, gas or electric), the advisory role played by a long-term, multi-brand rental company such as FRAIKIN becomes critically important. By looking at the company’s precise needs, it is possible to specify the most suitable vehicles. And as a rental contract has an average duration of between 36 and 48 months, regular fleet adjustments can be tailored to the latest restrictions and employees’ transport requirements.