The Car and Truck Fleet and Leasing Management Magazine

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Lease or Purchase Comes Down to More Than Cost

October 2017, by Gerry Tellier, Senior VP, Business Development

Rent or own a house? Lease or purchase a vehicle? Since the advent of landlords, and lessors, these questions synonymously became intertwined for the usually confused consumer.

Since the ‘50s, these two types of transactions became widely polarized. With home ownership, you had a financial instrument that predictably appreciated over time. On the other hand, a vehicle would lose 20 percent of its value the day it left the dealership.

Additionally, the pendulum of the U.S. government for the last 30+ years rewarded home ownership, but treated the renter as a transient member of society. At the same time, to increase domestic automobile production, the government realized it needed to incentivize Americans to replace their vehicles more often.

That was the time the corporate leasing model resonated in the boardroom. However, the opinions were still very mixed. Up to that point, the knowledge of leasing was strictly what was offered at retail – an onerous and restrictive closed-end lease that had rigid term, mileage and condition clauses. 

An open-end TRAC lease had been around for dozens of years, but quite frankly, it was more difficult to sell. A concept was being sold, and not a rate. Before Reagan took office, interest rates were well above 20 percent. And unsurprisingly, the concept of an open-end lease with a floating interest rate was enticing to Fortune 100 companies, which provided credibility to all those that followed.

Today, interest rates are slowly climbing from historical lows, and the government is once again a catalyst in the lease versus ownership debate. However, from a fleet perspective, the analytics very often result in a cost-neutral scenario. And, of course, you should validate this hypothesis with your tax accountant before making any decisions. 

If you discover that leasing and purchasing are equally cost effective, you then need to evaluate all the other factors that enable your organization to perform at maximum efficiency.

That’s the bottom line. It’s about more than just costs. Read this eBook to find out more.

 About the Author

Gerry Tellier serves as senior vice president, business development, for LeasePlan USA. He leads a team of business development professionals tasked with identifying financial and funding solutions, services and programs related to fleet mobility for companies big and small. As a 36-year industry veteran, Gerry prides himself on his ability to assess a client’s needs and provide a solution that meets those unique needs.

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