Navigating the Road: Lease vs. Own for HVAC Fleet Vehicles

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In the dynamic world of HVAC businesses, the decision to lease or own fleet vehicles is a critical one that hinges on various factors such as business size, growth plans, cash flow, and specific operational needs. While some companies have traditionally owned their entire fleet, others have explored leasing options with mixed results. Each approach comes with its own set of pros and cons, and the choice may evolve as the business landscape changes.

Leasing offers advantages such as lower upfront costs, flexibility in vehicle rotation, and access to the latest models and technologies. However, it comes with drawbacks like limited customization, changing interest rates, higher monthly payments, and leasing fees. The decision to lease might be suitable for businesses experiencing rapid growth, aiming to allocate funds elsewhere, or seeking additional income streams.

Ownership provides businesses with full control, potential equity, and the ability to run vehicles until they are no longer operable, maximizing the return on investment. However, it comes with challenges such as draining cash flow, maintenance costs, and the responsibility of managing vehicle-to-technician ratios. The decision to own may be optimal for businesses with a strong cash position, planning for slower growth, or aiming for long-term stability.

According to this article from The ACHR NEWS, “While Aaron Storer, executive vice president at Storer Services, said that owning the vehicles is the most profitable choice for the company, it’s a real drain on cash – especially considering all-around price increases since the pandemic. What used to cost Storer Services about $43,000 for a truck now costs around $70,000.” Storer highlights the challenge of sustaining such rapid growth while paying cash for each new vehicle, emphasizing the need for businesses to carefully assess their cash position, growth plans, and prevailing interest rates.

Purchasing a fleet of business vehicles shares a similarity with buying a personal car: the multitude of add-ons and options that accompany the main vehicle. Whether opting for a prepaid maintenance contract, an open-ended lease, or a personalized billing plan, the decision-making process extends beyond the vehicle itself. Much like purchasing an individual car, thorough research is essential. Various dealers may present diverse prices and packages for the identical vehicle model. Investing time in a few phone calls and conducting some legwork can result in substantial savings, potentially amounting to hundreds or even thousands of dollars.

Let’s Compare

Depreciation: Leasing allows for lower upfront costs and avoids the complexities of selling depreciated vehicles. Monthly payments are lower, preserving capital for other business needs. On the other hand, ownership provides the opportunity for equity buildup, but businesses bear the responsibility of managing depreciation and selling vehicles when needed.

Company Image: Leasing enables frequent upgrades to newer models, presenting a positive image for companies. Ownership may result in the use of older vehicles, potentially impacting the company’s image in terms of technology, safety features, and overall appearance.

Maintenance: Leasing often includes maintenance packages, reducing costs and ensuring vehicles are consistently upgraded. Ownership requires businesses to manage maintenance, potentially leading to higher costs if not handled efficiently.

Consulting & Support: Leasing comes with tailored services, including analytics, lifecycle optimization, and customer support, provided by leasing partners or fleet management companies. Ownership places the responsibility on the business to analyze data, manage inventory, and source various services independently.

Vehicle Cycling, Replacement & Remarketing: Leasing provides a structured vehicle cycling strategy with defined terms, residual values, and disposal handled by leasing partners. Ownership offers flexibility but necessitates businesses to determine when to replace and dispose of vehicles.

Fuel Management & Costs: Leasing often includes fuel management programs, offering cost savings and detailed analytics. Ownership provides the flexibility to choose fuel card providers or fleet management companies for this service.

The decision to lease or own fleet vehicles is nuanced and depends on the unique needs and circumstances of each HVAC business. While leasing provides financial advantages and flexibility, ownership offers control and potential long-term benefits. HVAC contractors must carefully evaluate their cash position, growth plans, and operational requirements to make an informed choice that aligns with their business objectives.

Ultimately, whether to lease or own is a strategic decision that impacts not only the financial aspects of a business but also its operational efficiency and overall trajectory. HVAC contractors should consider the evolving landscape of their industry, weigh the pros and cons, and adapt their approach to fleet management as their business evolves.

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Posted In: Vehicles & Fleets