Vehicle leasing: unbundling services is a cost-effective option

By Stuart Donnelly, chief regional officer for Northern Europe, Fleet Logistics

When it comes to choosing the ideal fleet management and leasing company supplier, it is no longer the case that one size fits all.

Among a growing number of senior, strategic-sourcing procurement executives, there is a growing recognition that leasing vehicles from a single source of supply, with a full bundle of associated services, is not the most cost-effective or operationally efficient solution.

Today’s professionals are increasingly prepared to source the lowest cost funding solution available and unbundle some of the services that have traditionally been wrapped up in the leasing package.

At the same time, the need to source funding as part of the fleet management package varies from company to company.

Some companies are cash rich with high levels of liquidity and access to lower cost of capital than their leasing companies.

Others simply require the provision of funding but want to optimise the funding rates they receive, while some will accept some or all of the residual value risk, while others may be risk averse.

As a consequence, large fleets use an array of sourcing methods, including self-funding, financial leasing and contract hire.

It is our view that single supply is still suitable for certain small fleets operating low numbers of vehicles which require simplicity over complexity due to their low volumes.

Large fleets, however, are embracing multi-bidding, either on a vehicle-by-vehicle basis or in batches, using a panel of leasing suppliers all competing against each other on price, to ensure the most cost-effective solution.

Many companies now recognise the value and quality of going to the best supplier that suits their business needs, rather than the one with whom the leasing company has a contractual arrangement.

To manage this host of relationships requires a mechanism to handle the interface between the company and the various third-party suppliers it elects to use.

An independent, supply chain oriented fleet management specialist is ideally suited for this purpose.