August 2007 - Feature
Recalculation Adds Flexibility to Closed-End
By Christine Erice
For many fleet managers, the closed-end lease means everything is “fixed.” However, this isn’t always the case. By offering customers more options and mid-term lease recalculation, LeasePlan USA, a vehicle leasing and fleet management company, has made the closed-end lease a more flexible option. Lease-Plan has created a solution that addresses the most common concerns about the closed-end lease: mileage parameters, fixed payments, and fixed terms. The Lease- Plan recalculation program can be easily implemented and individually customized according to fleet use.
“We wanted to provide a flexible product and partner with our clients to deliver a product that meets their needs,” said Sheri Maple, director of business development at LeasePlan. “Clients were concerned about the closed-end lease being inflexible. There is a preconceived notion that at the end of the lease, you will be charged excessive fees. That is a common misconception that our closed-end lease mitigates.” On average, the open-end lease is the most popular choice for U.S. fleets. In contrast, the European fleet market prefers the closed-end lease option.
“We have seen an increased demand for the closed-end lease over the last few years for several reasons, including de-risking the residual value exposure,” said Kristofer Bush, marketing director for LeasePlan USA. “We know this is not the solution for every U.S. company. The closed-end lease is not our primary solution. LeasePlan still is very much an open-end leasing company, but we see the need and request for other leasing solutions,” said Bush.
Recalculation Saves Fleet Dollars
Traditionally, a closed-end lease-term is set up based on expectations of the lessee. LeasePlan uses either an average term and mileage for the whole fleet or individualizes each driver’s usage and matches it with each lease term.
“Once a driver is on the road for a few months, a sample mileage is compared with actual usage against what the contract mileage was up-front. Based on that, a scenario analysis is done and the payment is adjusted to reflect actual mileage and corresponding residual value,” said Jon Toups, national VP, sales, marketing and client relations for LeasePlan USA.
The same holds true for undermileage. With recalculation, payments can be adjusted down as well. Fleets frequently change driver territories or vehicles. If a particular driver is clocking more or fewer miles than those calculated in the original lease, rather than having an overmileage fee applied at the end of the lease or losing credit for undermileage, LeasePlan recalculates the entire payment mid-term.
“If that fleet wants to stay under a particular mileage, we can also shorten the lease term,” said Toups. “By eliminating hidden fees and overage charges at the end of the lease term, LeasePlan’s recalculation program has taken the guesswork out of the closedend lease.”