Electric fleet leasing vs. ownership: Pros and cons for businesses

Jun 19, 2024 · 10 min read · blog

The number of electric vehicles in corporate fleets has seen a significant increase over the past few years, driven by the push for sustainability goals and market regulations. As businesses consider integrating EVs into their operations, a key decision they face is whether to lease or own their electric fleet.

This blog post explores the pros and cons of leasing versus owning an EV fleet, providing insights to help businesses make an informed choice. By examining the financial implications, flexibility, maintenance responsibilities, and other factors, we aim to guide companies in determining the best approach for their specific needs and goals.

Understanding electric fleet leasing - Pros and cons

When considering whether to lease or own an electric fleet, it's important to understand what each option entails and how it impacts your business operations - first, let’s talk about leasing.

Fleet leasing involves entering into a contractual agreement with a leasing company to use their vehicles for a specified period, typically ranging from two to five years. Under this arrangement, the business pays a fixed monthly fee, which usually covers the cost of the vehicles, maintenance, and sometimes insurance. Leasing provides companies with access to the latest vehicle models without the significant upfront costs associated with purchasing. At the end of the lease term, the vehicles are returned to the leasing company, and businesses can choose to lease new vehicles or extend their current lease agreements.

Choosing to lease an electric fleet offers several advantages and disadvantages for businesses. The pros of leasing an electric fleet include:

  • Lower initial costs: Leasing significantly reduces the upfront expenses compared to purchasing vehicles outright. Instead of a large capital outlay, businesses make smaller, manageable monthly payments, freeing up capital for other investments.
  • Flexibility: Leasing offers the flexibility to keep up with rapid advancements in electric vehicle technology. At the end of each lease term, businesses can upgrade to newer models without the hassle of selling or disposing of older vehicles, ensuring their fleet remains up-to-date with the latest innovations.
  • Maintenance and repairs: Leasing typically includes provisions for maintenance and repairs, which are covered by the leasing company. This saves businesses from unexpected costs and reduces the administrative burden of managing vehicle upkeep. This is particularly beneficial for EVs, which may require specialized knowledge and parts for servicing.

Of course, leasing can also have some disadvantages:

  • Long-term costs: Although leasing offers lower initial costs, it can lead to higher long-term expenses compared to ownership. Over time, the cumulative cost of lease payments may exceed the cost of purchasing and maintaining the vehicles. Businesses must weigh the immediate cost benefits against potential long-term expenses.
  • Contract restrictions: Leasing agreements often come with restrictions, such as mileage limits and conditions on vehicle modifications and wear and tear. Exceeding these limits or breaching terms can result in additional fees at the end of the lease. For businesses with high-mileage or unpredictable usage patterns, these restrictions can be a significant drawback.
  • Residual value uncertainty: One of the biggest challenges currently faced by leasing companies and businesses is the unpredictable residual value of electric vehicles. The rapid advancements in EV technology and fluctuating market conditions make it difficult to forecast the future value of these vehicles accurately. Unlike traditional vehicles, where residual values are more predictable, EVs pose a higher risk of unexpected value loss. Therefore, leasing EVs can be advantageous as it transfers the risk of depreciation to the leasing company, protecting businesses from potential financial losses if the vehicle’s value decreases more than expected over the lease term.

Understanding these points can help businesses evaluate whether leasing aligns with their financial and operational strategies. In the next section, we cover the benefits and drawbacks of owning an electric fleet.

Understanding electric fleet ownership - Pros and cons

Owning an electric fleet involves purchasing vehicles outright, giving businesses full control over their assets. This approach has its own set of advantages and disadvantages that can significantly impact your company's operations and financial planning.

Again, first, let’s cover the pros of owning an electric fleet:

  • Asset ownership: Owning your fleet provides full control and long-term value. Businesses can keep vehicles as long as needed, sell them, or repurpose them. This flexibility is valuable for companies with specific requirements or long-term plans. However, as we mentioned earlier, it's important to consider that in the current market, the depreciation of electric vehicles is challenging to predict. This uncertainty introduces a risk factor, as the future resale value of EVs can fluctuate significantly. Businesses must carefully weigh these potential risks against the benefits of owning their vehicles.
  • Cost savings over time: Though the initial investment is higher, owning can lead to lower costs in the long run by eliminating ongoing lease payments. Vehicles retain residual value that can be recouped through resale, which can offset initial costs. Additionally, owning your fleet helps you avoid extra costs associated with leasing, such as administrative fees and services that might not be crucial to your operations, leading to more efficient use of your resources.
  • Customization and flexibility: Owning your fleet allows for extensive customization to meet specific business needs, such as installing specialized equipment or adding branding. This level of personalization is often restricted in leasing agreements. Also, ownership provides the flexibility to sell or repurpose vehicles as needed, such as when an employee leaves, offering a dynamic approach to fleet management that can quickly adapt to changing business requirements.

Meanwhile, the cons of owning an electric fleet include:

  • Higher initial costs: Purchasing requires significant upfront capital, which can be a financial barrier, particularly for smaller businesses. This expense includes the cost of the vehicles and any supporting infrastructure.
  • Depreciation: Vehicles naturally lose value over time, which impacts their resale value and must be accounted for in financial planning. Depreciation can significantly reduce the overall financial benefits of owning a fleet, as the market value of the vehicles decreases annually. Additionally, owning the fleet means bearing the risk if a vehicle is seriously damaged. While insurance may cover a portion of the loss, there are typically financial gaps that the company must absorb, leading to potential losses beyond depreciation.
  • Maintenance and repairs: Owners are responsible for all maintenance and repair costs. Unlike leasing, where these are often covered, ownership means managing and financing all upkeep, which can become more costly as vehicles age.

Now that we explained each option in detail, let’s discuss the key factors to consider when deciding between leasing and owning an electric fleet.

Factors to consider when choosing between leasing and owning

When deciding whether to lease or own an electric fleet, businesses should evaluate several key factors that can impact their operations and finances.

  • Budget and financial planning: Leasing generally offers lower initial costs and predictable monthly payments, making it easier to manage cash flow and budget for businesses with limited capital. This can be beneficial for companies looking to avoid large upfront investments. Owning, however, involves significant upfront costs but may offer long-term savings as you avoid ongoing lease payments and can benefit from the residual value of the vehicles when they are sold.
  • Business needs and fleet usage: The specific operational needs and usage patterns of your business are critical in this decision. Ownership is ideal for high-mileage fleets or those requiring significant customization since it allows for unlimited mileage and more flexibility in vehicle modifications. On the other hand, leasing is better suited for businesses that value the ability to upgrade to newer models regularly and prefer having maintenance and repairs managed by the leasing company.
  • Technological advancements: With rapid advancements in EV technology, leasing provides the flexibility to easily upgrade to the latest models, ensuring your fleet benefits from improved efficiency and performance. This is particularly advantageous for businesses needing to stay competitive with the latest technology. However, if your company is comfortable with the current EV technology and looks to maximize the lifespan of its vehicles, owning may be a better fit.

If businesses consider and prioritize these aspects, they can determine whether leasing or owning an electric fleet aligns best with their financial goals and operational needs. In the next section, we explain how Volteum can assist in making this decision.

How Volteum helps decide between leasing or owning an EV fleet

At Volteum, we understand the complexities and significant decisions involved in managing an electric fleet. Whether you are considering leasing or owning your fleet, our Electric Fleet Planner offers powerful tools to help you simulate and evaluate each scenario comprehensively.

  • Simulation and analysis: The Electric Fleet Planner enables businesses to simulate both leasing and owning scenarios with a wide range of customizable settings. You can adjust various factors such as vehicle types, usage patterns, and financing options to see how each choice impacts your fleet’s total cost of ownership (TCO). This simulation provides a detailed financial outlook, helping you understand the long-term implications of each option.
  • Comprehensive TCO comparison: Our platform allows for detailed TCO comparisons between leasing and owning. By factoring in local pricing for energy, maintenance, and other operational costs, businesses can see a clear picture of their potential expenses. The tool also considers variables like depreciation, residual values, and maintenance costs, providing an in-depth analysis that aids in making informed financial decisions.
  • Localized settings and language support: Understanding that businesses operate in diverse environments, Volteum's Electric Fleet Planner supports a wide range of local settings, including language preferences and regional pricing. This ensures that the tool provides relevant and accurate information tailored to your specific geographic location and market conditions. You can customize the simulation to reflect your local context, making the insights more applicable and actionable for your business.

Deciding between leasing and owning depends on various factors, and businesses should assess these elements carefully to determine which option aligns best with their strategic goals and operational requirements. Volteum’s Electric Fleet Planner can assist in making this decision - whether you are leaning towards leasing or owning, our tool helps you navigate these choices with confidence, ensuring that your fleet management strategy is both efficient and cost-effective.

For more personalized support and detailed insights, contact Volteum today - our experts are ready to help you with any questions regarding EV fleets.

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