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CISDbusman
Advanced Member
306 Posts |
 Posted - 08/08/2017 : 04:23:52 AM
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We have never leased a bus before and are looking into it for our next budget cycle. Anyone have any thoughts as why its a good option or why it isn't?
What companies lease busses? I know BB does. Can you lease an IH?
Thanks all!! |
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Thomasbus24
Administrator
USA
4547 Posts |
Posted - 08/08/2017 : 06:19:32 AM
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According to my reps, all 3 major players lease now. One of our nearby neighbors got way behind on buying so they leased 5 new buses to get them out of a jam. Let's just say each bus was $85,000 to keep it simple, here is how it was explained to me:
Year 1 (payment due on delivery): $85,000
Year 2: $85,000
Year 3: $85,000
Year 4: $85,000
Year 5: $85,000
Year 6: want to own them now? $5 ($1/each).
Now again...this is how it was explained to me, not my first-hand knowledge.
I can see a real benefit if you have a tired fleet and need help right now. |
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krmvcs
Advanced Member
362 Posts |
Posted - 08/08/2017 : 07:03:22 AM
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| We did the same with 4 units. The other benefit is that when you consider that the cost of a bus increases every year you may actually spend a little less per unit. for example, 4 units at about 200K spread across 5 years cost us less than outright purchase of a new bus at 200K, then 200K + 2%, and so on for every year. Along with spreading that cost across several budget years. The only downside of this that I see from a maintenance perspective is having several units that will have the same age/mileage when they are due to be retired. |
-Ken- |
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RonF
Top Member
867 Posts |
Posted - 08/08/2017 : 12:29:49 PM
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| I don't think this is a good option if you are going to do it every year. |
US Army retired CMBT |
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bwest
Administrator
United States
3820 Posts |
Posted - 08/09/2017 : 2:33:00 PM
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| We've have never leased. You can go to a bank and borrow the money and come out ahead. That's essentially what you are doing when you lease. |
Bryan |
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bfaulkner
Senior Member
168 Posts |
Posted - 08/10/2017 : 09:33:22 AM
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| We have s sister district that leases alot. 3 year lease for reg ed. 12,500 a year. Spec needs is a bit more around 16 I think. At the end we send them back and get 3 more. It works great for us. most is covered under warranty so cost on repairs are down. |
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torque
Advanced Member
Canada
358 Posts |
Posted - 08/10/2017 : 09:55:42 AM
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You should sit down with your salesman and go over your options. They likely offer basic lease, full service lease. Not sure if tax laws are the same there as here so check locally. Here you can write off your full lease payment but if you purchase you can only claim depreciation of the vehicle each year. Check with your accountant to see in the end if any big differences from a dollar prospective.
Also to consider, how picky are they at the end of the lease, minor scratches and dents allowed or will you have to make like new upon returning the vehicle? I you purchase, say loan over 5 years, you still have a vehicle at the end, you lease you don't.
Also the angle bfaulkner is looking at, you basically know the cost of operation for the term of the lease, most repairs will be warranty, easier to budget for.
Lots to think of and consider :)
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second.flood
Top Member
USA
640 Posts |
Posted - 08/10/2017 : 10:20:52 AM
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quote:
Originally posted by bwest
We've have never leased. You can go to a bank and borrow the money and come out ahead. That's essentially what you are doing when you lease.
If the cost of a unit is the same as if you bid it out, what's wrong with the lease?
Year 1 (payment due on delivery): $85,000
Year 2: $85,000
Year 3: $85,000
Year 4: $85,000
Year 5: $85,000
Year 6: want to own them now? $5 ($1/each).
How would a loan beat this? Borrow $42,5000 at 4% you'd pay $45,000 over 5 years. |
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Thomasfan89
Top Member
USA
1155 Posts |
Posted - 08/10/2017 : 11:40:44 AM
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| At my previous district, we did a five-year lease-to-purchase for our last two bus purchases and it works pretty much exactly as Thomasbus24 explained. For us, it was a way to "finance" the bus purchase. We didn't have the money to pay outright for two brand new buses, but the lease payments per year were manageable in our budget. Otherwise, we would have been stuck getting one or no buses each year, and with the lease purchase, we were able to push out some old buses that were going to cost big money to keep on the road another year. It is a great way to get creative when money is tight and you are in dire need of new buses. |
Edited by - Thomasfan89 on 08/10/2017 11:41:08 AM |
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baptistbusman1
Senior Member
USA
175 Posts |
Posted - 08/11/2017 : 05:51:29 AM
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| How does it work with maintenance on your leased buses? Are your mechanics allowed to do any work on them? Are there any maintenance requirements that have to be met in the lease agreement? |
I was formally Baptistbusman. However, I lost my password, and had not updated my email address.
Here is a link to my old posts. http://www.schoolbusfleet.com/forum/search.asp?mode=DoIt&MEMBER_ID=1846 |
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Thomasfan89
Top Member
USA
1155 Posts |
Posted - 08/11/2017 : 08:08:03 AM
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quote:
Originally posted by baptistbusman1
How does it work with maintenance on your leased buses? Are your mechanics allowed to do any work on them? Are there any maintenance requirements that have to be met in the lease agreement?
We were allowed to do all the work on the leased buses. I don't think there were any particular maintenance requirements in our agreement. In all honesty, it was more of a way to finance the buses since we were going to be purchasing them after the 5 or 6 year term. Its much more like an auto loan than it is an auto lease. I believe the reason its termed as a lease (besides the interest rates and such) is because public entities should not (or is it cannot?) incur debt. |
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JRob
Advanced Member
207 Posts |
Posted - 08/13/2017 : 09:26:11 AM
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I think the question as to whether a lease/purchase is right for a district comes down to what their goal is.
One desirable goal is to have an average fleet age such that you don't have a high number of very old i.e. "expensive to maintain" vehicles.
In such a situation an combination of outright purchase and lease purchase with a goal, over time, of lowering average fleet age is a good strategy. |
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bwest
Administrator
United States
3820 Posts |
Posted - 08/14/2017 : 09:15:33 AM
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quote:
Originally posted by Thomasfan89
At my previous district, we did a five-year lease-to-purchase for our last two bus purchases and it works pretty much exactly as Thomasbus24 explained. For us, it was a way to "finance" the bus purchase. We didn't have the money to pay outright for two brand new buses, but the lease payments per year were manageable in our budget. Otherwise, we would have been stuck getting one or no buses each year, and with the lease purchase, we were able to push out some old buses that were going to cost big money to keep on the road another year. It is a great way to get creative when money is tight and you are in dire need of new buses.
Arguably, the purchase price would be lower. They aren't going to lease these without making money someplace. |
Bryan |
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Admin
Administrator
USA
1662 Posts |
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Leasing a bus. Pro's and con's
