SALE AND LEASEBACK

Sale And Leaseback car leasing companies >>

Once seen as a last-ditch financial resort, sale and leaseback has reinvented its reputation thanks to its success in the vehicular market. Now it is seen as a fast-track method of releasing capital into your business and providing all the benefits of contract hire to your existing fleet. This guide to sale and leaseback will explain how the process works and who sale and leaseback is right for.

Quick links:

• What is sale and leaseback?
• What are the pros and cons of sale and leaseback?
• Who is sale and leaseback right for?

What is sale and leaseback?

If your business is in need of an injection of capital, then sale and leaseback could be a saving grace, providing you are already in ownership of a fleet of vehicles.

The process sees you agree a realistic market value with a buyer – usually a leasing company. You then sell the vehicles to the buyer who takes ownership and then leases the fleet back to you. This provides your company with an immediate cash injection and allows you to reap the benefits of a traditional contract hire deal. With sale and leaseback, further depreciation is no longer a concern.

So what do you need to do to put a sale and leaseback deal into action?

The first step is to bring together all of the essential information about your fleet – such as mileage, registration dates, exact model and general condition. You’ll also need to produce the vehicle’s maintenance history. This is the most time-consuming part of the process.

From there, the leasing company should come up with a valuation of your fleet – usually based on industry guides such as CAP or Glasses Guide. The buyer will then make an offer for your fleet, and also offer you terms for a contract hire agreement based on mileage, duration of the term and the estimated future value of the vehicle. As with a traditional contract hire deal, you pay the difference between the current value and the future (residual) value in monthly instalments.

Once an agreement is reached, the buyer will write you a cheque and take hold of the V5s of the vehicles. You then start to make your monthly payments and your sale and leaseback deal is under way.

What are the pros and cons of sale and leaseback?

There are many incentives that encourage companies to consider sale and leaseback deals, including:

• Immediate cash injection – The sale of the fleet allows you to put money into other projects.
• Seller remains in day-to-day control of the vehicles sold.
• Improvement of balance sheet through the sale of fixed assets.
• Further depreciation and re-sale concerns removed – you no longer have to worry about the future of your fleet or its disposal.
• Simpler budgeting – a contract hire deal will allow you to deal with fixed monthly payments and it is possible to take out maintenance packages so your only concern is fuel and insurance for the vehicles.
• New for old – Through sale and leaseback you can establish a contract hire deal which allows you to replace the vehicles with new vehicles at the end of the term.

The downside to sale and leaseback is straightforward – you lose ownership of the vehicles. They are no longer your property and therefore the value of your assets is decreased.

Who is sale and leaseback right for?

Any company that requires an immediate cash injection may consider sale and leaseback as a strong alternative to taking out further loans or plunging into debt. Furthermore, it removes the day to day risks and difficulties of fleet management and allows your company to reap the rewards of traditional contract hire – such as the ability to replace old vehicles with new models at the end of the term.

If you think that sale and leaseback could be right for your company, check out the listings at ContractHireAndLeasing.com to discover the range of deals available.