SALE & leaseback is a popular funding method.
It’s utilised by companies in all sectors of business.
Sale & leaseback is most suitable for businesses that have more than 25 vehicles.
So how does sale & leaseback work?
Here’s how: a fleet management company (called the lessor) buys a company’s existing fleet of cars and vans.
It then leases it back to the company (called the lessee) at a fixed monthly rental for an agreed period.
The funding method most commonly chosen is contract hire – business car leasing.
What are the benefits of a sale & leaseback agreement?
- Company funds tied up in the fleet asset are released. These can then be reinvested in the company’s core activities.
- The financial risks of running the company’s fleet are now outsourced to the lessor – this includes vehicle depreciation.
- Fixed monthly payments facilitate the lessee’s long-term financial planning and budgeting.
- Many of the company’s admin burdens are removed – and they can also benefit from a range of services and fleet management expertise provided by the lessor.
There are some possible drawbacks. Companies that own their vehicles have the flexibility to sell when they wish – possibly taking advantage of good selling conditions and making the most of the value.
