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Updating an Aging Fleet Through Leasing

Data Management & Development

The Challenge

A technology company focused in the engineering industry with 150 fleet units are dealing with rising variable costs due to their aging fleets. Outlaying cash to purchase new vehicles was painful, and they struggle with the decision to lease versus buy. They are a data driven company, which means management needed hard numbers in order to make any decisions. They lack a defined fleet policy around vehicle selection and replacement cycles.

The Merchants Solution

Merchants developed data models through to illustrate options for reducing cash outlays and identifying best-in-class vehicles that fit the application so the company could make more informed fleet decisions. This data also helped the company adopt the right cycling policy for each segment within the fleet.

The Results

Having these models allowed the company to evaluate leasing versus ownership, which showed that the company’s net present values of cash flows and savings opportunities were more financially favorable when taking an open-end leasing approach. The net cost savings resulting from leasing approached $1.1 million annually. With the financial payments making sense, this was ultimately the final factor in switching to a lease program. The company was also able to better identify best-in-class vehicles, and slice and dice the data specific to the vehicle’s application within the fleet, which turned vehicle selection into a much simpler process. The company ended up replacing 60% of its existing fleet.

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