A flexible, customized Sale & Leaseback program can free up valuable working capital, increase capital and finance growth, while allowing a company to continue using its fleet vehicles – and equipment. That's where Addison Fleet program is unique because its extensive experience means it can structure business financing to include equipment. Fleets can realize additional cash flow while keeping ownership of all their business assets.

Stephen Carey, Addison Fleet's Western Canada Manager - Sales & Client Service, is based in Airdrie, Alberta, and recently worked out a unique program that saved his client more than one million dollars. (Read the details of how it was done – and the positive results – in the case study.)

The Addison Fleet program means a company gets an immediate 100% cash injection. Freeing up capital means a fleet company can use that cash in various ways  – from getting additional equipment, to hiring new staff, or doing new research and marketing – that help meet its needs, which is especially welcome with current industry challenges.

The program simplifies the entire process of sourcing, purchasing, upfitting and more. Addison Fleet buys the vehicles and equipment at fair market value and then the fleet company leases it back – and reduces its risk because the asset's ownership passes to the lease company.

Every Addison Fleet sales and leaseback program is created to suit a fleet company's unique business needs and budget, with support and advice throughout the process. It also offers simplified budgeting – one invoice instead of several – and access to flexible solutions to solve complex fleet challenges. Addison Fleet strives to be more than just a leasing company, offering customized solutions that make it a full fleet partner.

CASE STUDY

Situation

A large multi-provincial Canadian fleet company, involved in the HVAC industry, had historically used cash to purchase their fleet vehicles. They had a fleet of more than 200 vehicles and typically replaced 25-30 vehicles each year at an average cost of $45,000*, for an annual cash outlay of $1.1 million.

Recently, the company changed its business model, with responsibility for profit and loss moving from the corporate office to the divisions.

Challenges

Not only was the million dollars coming out of the company's capital budget, but management also dealt with various providers: the dealer for the vehicles, then a separate upfitter, and then graphics ordered from another provider Those three different suppliers involved the generation of three invoices. In addition, there was the cost of the additional hours or days used to locate the vehicles, coordinate the upfitting, and arrange for the graphics.

The company was paying cash (at an average of $45,000) for a depreciating asset, which could be sold for an average of $20,000 after five years. While the vehicle's cost was then only $25,000, it took five years to realize that $20,000.

Finally, some of the less-experienced division branch managers might be spending weeks on the sourcing, buying, and upfitting process, rather than on managing the business.

Solution

Stephen Carey, Addison Fleet's Western Canada Manager - Sales & Client Service, set up a customized sale and lease program, with the company paying a set monthly amount and needing only one invoice. Through the program, Addison Fleet takes care of sourcing the vehicles, doing the factory order, looking after the upfitting, and taking care of the graphics.

For each vehicle leased (rather than bought with cash), the company pays an average of $25,000 in lease payments and then gets the balance outstanding of what was owed on fair market value when the vehicle is sold ­– saving $20,000 over five years because it was never paid out as cash in the beginning.

Result

Within two weeks of confirming the sale and leaseback program, the company has already seen a savings of $48,000, because Addison Fleet sourced 11 vehicles with concessions on three of them that saved $16,000 each.

In addition, Addison Fleet is doing an equity analysis on the company's remaining fleet vehicles, deciding which top 30 can go into the program, thereby freeing up an average of $30,000 per vehicle.

Ultimately, through the sale and leaseback program, the company will save more than a million dollars cash, which can be used as needed on building upgrades, marketing, or whatever it chooses. It's also simplified administration costs, and the division managers can use their valuable time and expertise on managing the business.

 

* All amounts shown are in CAN$.

© 2022 First XV. All rights reserved.