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In the current economic climate, many capital expenditure (Capex) budgets have been cut. Finance or transport managers faced with these shrinking Capex allowances typically arrive at the question: “do I invest in a fleet management company to improve my operations or buy new fleet vehicles?”
Both approaches have their pros and cons, but first it’s important to consider the difference between capital expenditure and operational expenditure (Opex) when it comes to fleet management.
Capex vs Opex
A Capex fleet management solution would generally require a large, upfront purchase of vehicles, with additional maintenance charges, whereas Opex would be an all inclusive monthly fee. A monthly service model is an Opex line item, which typically has favourable tax and budgeting advantages to Capex. While Opex will appear in your budget as an ‘operating cost’, Capex is considered as ‘equipment with depreciation’. Using a slug of profit to pay for the rental of vehicles, rather than buying vehicles that will depreciate, is an efficient way of managing your tax.
Plus, with lower upfront capital commitments, you reduce the risk of hidden costs and budget concerns over ongoing fleet management support, vehicle maintenance and upgrades.
Given the points above, many fleet providers are now re-adjusting purchase and licensing business models to offer such services as monthly recurring offerings instead. This means the majority of fleet management services are no longer capital expenditures, but becoming operating expenditures.
At Flex-E-Rent, we can offer fleet management solutions to suit your business, without the need for upfront capital investment. Our approach is based on looking beyond a simple list of requirements or contractual obligations and thinking carefully about how what we do affects you as a business both now and in the future. Get in touch with one of our experts to find out more or download our practical and helpful guide to financing your van fleet.
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