11 Dec The Future of Fleet Funding
Technological innovation is moving quickly, bringing new solutions to each and every business sector, including fleet financing. In this article, we steer into what the future holds in store for fleet funding, discussing innovative alternatives to traditional finance and the shared economies of fleet sharing.
Alternatives to traditional leasing and outright ownership
Traditionally, vehicles are acquired through purchasing. Purchasing vehicles outright means the owner has full control over its operation and disposal. However, this necessitates large amounts of capital, although cash discounts and tax incentives for making these purchases do exist.
Companies that lack the capital to own can acquire financing though loans and bank overdrafts, and hire and lease-purchasing. This, too, is not without its costs, which has moved many to embrace leasing in its own right.
Leasing can be either fixed-term or financed. Fixed-term leasing gives companies full use of vehicles over a given period, where payments cover the cost of borrowing capital (for vehicle purchase) and may even cover vehicle maintenance. Finance leasing entails companies covering all costs incurred regarding the vehicle in the period leased, and sometimes leases can be extended at significantly reduced costs.
Today, alternative models for leasing and the push to save costs are felt in the fleet management industry, where new technology-driven solutions are becoming available, such as lease management software that can streamline the leasing process and even crowdfunding. Some examples of the latter are Yes-Man, a Dutch company that combines crowdfunding with leasing, acting as a new path to fleet acquisition, and Beequip, another Dutch outfit, which takes an equipment-based approach to leasing. Instead of seeing leasing as a numbers game, they use product and industry specific knowledge to drive leasing.
Fleet sharing
An innovative alternative to lowering the costs of fleet leasing or ownership is fleet sharing, which is the logistics version of the sharing economy. Vehicles are shared amongst companies, and this sharing of fleet assets helps reduce costs and optimise processes.
As is the case with many of today’s technological innovations in the sharing economy, platforms are needed to centralise tasks, and also to govern when and where assets are shared. In this regard, FLOOW2 provides a platform where companies can share business assets and services with other businesses. Also in regards to fleet sharing, Belgian logistics company VIL will begin a project in December where they not only look into the cost reducing possibilities of sharing vehicles, but also if increased profits can be earned by renting out excess capacity.
The big picture
One of the issues with owning fleet assets is the quickly depreciating value of these assets. Companies must find better ways to satisfy the need for transportation while avoiding losses and placing capital in areas where it can result in high returns is challenging.
Alternative, technology-driven mechanisms of finance are meeting these opportunities by providing businesses with ways to optimise their uses of vehicles. They therefore may be forming a challenge to traditional lenders, such as banks. This makes fertile ground for fintech companies to come in and add value.
If you want to know more about fintech innovation and how this impacts the logistics industry please join us at our session on December 13th.