03 Jun Why is Fleet Leasing Becoming Popular?
Commercial fleet leasing for vehicles isn’t new but this area is undergoing a lot of changes because of the way the industry is growing. This has made it extremely difficult for many businesses to manage their fleets on their own.
Not surprisingly, it has also increased the interest of various businesses to consider the benefits of different transportation models such as owned, blended or leased fleets. Out of these three options, commercial fleet leasing has grown at a surprising rate because it has so many benefits to offer. While in the past, around 35% of major business fleets were leased, this number has been growing slowly over the years due to the fact that there are so many benefits that tip the scales in the favor of commercial fleet leasing. The following are just a few which highlight why commercial fleet leasing is becoming so popular.
Due to Tax Reform
According to the Tax Cuts and Job Reform Act (TCJRA) in 2017, the rate of corporate tax has decreased from 35% to a mere 21%. This essentially means that businesses have a healthier cash flow. It also shows that there is a surplus available for asset acquisition.
However, businesses that have ownership might not see the benefit in the lower tax rate. The lower rate offsets the value benefit that they can acquire. TCJRA has also added a cap on the interest generated or the limit on overall expense deductions.
Based on the guidelines, the write-offs of the company are limited to only 30% of the overall Earnings before Interest, Taxes, Depreciation, and Amortization – EBITDA. In 2022, this is going to become even more restrictive when EBITDA is going to be replaced by EBIT. Due to this, anyone who’s looking to work with fleets on a long-term basis with a contract of 5 years will benefit more from commercial fleet leasing.
Improves the Focus of the Management
With a changing industry, most fleet managers already have too much on their plate from trying to change their practices and also maintaining the business’s structure, schedule, and flow. This means that they cannot bear to lose focus when they have to deal with the day-to-day disruptions.
With a leased fleet, they will be able to place many of their managerial duties on the shoulders of others while they look after other administrative changes. It’s a win-win situation and a perfect way to streamline the fleet.
Helps Deal with Worker Shortages
The shortage of workers is common in the logistics industry. For transportation based jobs, there is a distinct lack of drivers, proper rigs, vans and trucks, and even safety issues. Moreover, many drivers aren’t happy with driving outdated models because of the high risk they face.
Due to this, commercial fleet leasing is more popular as it allows for businesses to get access to better equipment, not worry about the drivers and be able to successfully focus on proper retention of the drivers.
With these major reasons, it is easy to see why commercial fleet leasing is becoming popular as more changes are being introduced to this industry. If you’re looking for help with your fleet, get in touch with Corporate Fleet Services Inc. today!