Understanding the Different Types of Fleet Leasing

If you’ve finally come to the point where scaling your business involves growing your commercial fleet, it’s important to make the most informed decisions about your fleet strategy. Much like your business, fleet leasing isn't a one-size-fits-all process, and it's essential to find a fleet leasing agreement tailored to the unique needs of your company. Here at Quest Automotive Leasing, we thought we’d take a deeper dive into the different types of fleet leasing agreements to help you decide which option would best align with your business as you embark on the journey of building your most effective fleet.

Types of Fleet Leases

There are several types of fleet leases available, each with its own advantages and considerations. Here are the common types of fleet leases:

Open-End Lease

In an open-end lease, the business takes on the risk of the vehicle's resale value at the end of the lease. If the actual resale value is lower than the estimated residual value, the business is responsible for the shortfall. This means the lessee makes up the difference if the vehicle is worth less than the predicted amount at the end of the lease. Conversely, the lessee benefits from the profit if it's worth more. This type of lease offers flexibility in terms of mileage and vehicle usage.

Closed-End Lease

In a closed-end lease, also known as a walk-away lease, your business isn't responsible for the vehicle's residual value. A closed-end lease sets a predetermined residual value, and the leasing company bears the risk of the vehicle's depreciation. At the end of the lease term, the lessee can return the vehicle and is not responsible for any shortfall if the vehicle's value is lower than the residual value. This type of lease is often preferred for its predictable costs.

Full-Service Lease

A full-service lease includes maintenance and service as part of the package. The leasing company takes care of routine maintenance, repairs, and other services, simplifying fleet management for the business. This type of lease can provide cost predictability and convenience.

Closed-End TRAC (Terminal Rental Adjustment Clause) Lease

Typically used for commercial trucks, this lease allows businesses to set a residual value. At the end of the lease, if the vehicle's actual value is higher than the agreed-upon residual value, the lessee receives a rebate. If the value is lower, the lessee is responsible for the difference.

Open-End TRAC (Terminal Rental Adjustment Clause) Lease

An Open-End TRAC lease is similar to a closed-end TRAC lease, but the lessee assumes the risk of the vehicle's resale value at the end of the lease. If the actual value is less than the estimated residual value, the lessee is responsible for the shortfall.

Sale-Leaseback

In a sale-leaseback arrangement, a business sells its existing vehicles to a leasing company and then leases them back. This can free up capital while retaining the use of the vehicles.

Short-Term or Spot Fleet Rental

For temporary or seasonal needs, businesses can opt for short-term rentals or spot rentals rather than traditional long-term leases. As the name suggests, short-term leases are for a shorter duration, often less than a year. They offer businesses the opportunity to fill temporary needs or manage peak periods without a long-term commitment. These rentals offer flexibility and can be cost-effective for short-duration requirements.

Get Affordable Fleet Leasing at Quest Automotive

Each type of fleet lease has its pros and cons, and the choice depends on your business's specific needs, financial considerations, and risk tolerance. Businesses should carefully evaluate their requirements and consult with fleet management experts to determine the most suitable type of lease for their operations. Here at Quest Automotive Leasing, we’ve been helping companies all over the GTA and Ontario find affordable leasing solutions tailored to the needs of their businesses. For more information about our commercial vehicle inventory, our fleet management systems, or other leasing services, feel free to contact one of our leasing specialists to learn your options and receive a quote today!