Hybrid Leasing Flexible Solutions

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Hybrid leasing flexible solutions

A hybrid lease is based around a finance lease agreement with a guaranteed residual value and operates in very much the same way as contract hire. However, it’s behind the scenes where the differences are seen in cost and simplicity.

Using data from our Actual Whole Life Cost (AWCL) system, we calculate structured agreements with or without maintenance and with a transparent disposal/residual value to take advantage of a vehicle’s resale value. We then make adjustments to all the elements to take into account the client’s own operational requirements, vehicle type and industry.

The key benefits of a hybrid leasing are:

    Flexibility

No early termination penalties
On or off balance sheet
Lower finance interest rates
Profit on sale of vehicle
No mileage restrictions
No excess mileage charges

Hybrid leasing transfers control from the finance provider to the client, which in itself provides many benefits. In terms of the cost benefits, we apply the same principles we use with managed funding to achieve the lowest cost funds from the market place for every vehicle.

Termination

Should you need to end/terminate an agreement for any reason there are no penalties just a simple calculation:

Balance outstanding less the vehicle’s value

For agreements ending after month 18, almost 50% conclude with the client receiving a credit, compared with 97% of contract hire agreements which make a charge.

Shared profit

Probably the most operationally important benefits come from the residual/disposal value structure and process where any profit on disposal is shared 90% to you, 10% to Total Motion.

Excess mileage or refurbishment costs are not made unless the vehicle fails to meet the required amount.

Possible scenarios

Example A

The vehicle is contracted for 90,000 miles with a disposal value of £4,500.

It actually covers 115,000 miles and at disposal realises a value of £4,800.

But rather than get a charge for 15,000 excess mileages you get a credit for £270.

Example B

TThe vehicle is contracted for 90,000 miles with a disposal value of £4,500.

It actually covers 72,000 miles and sells for £6,000.

You receive a credit for £1,350.

Example C

The vehicle is contracted for 90,000 miles with a disposal value of £4,500.

It actually covers 129,000 miles and sells for £4,500.

There is no charge.

 

Vehicle disposal

An integral part of a hybrid lease is the disposal – which makes the disposal process crucial to its performance.

This is why our approach is different to that of the leasing industry; instead of sending all vehicles to auction we work with the following channels:

  • Trade sale to vehicle traders and retailers
  • Retail via our used vehicle car site
  • Sale to staff

Depending upon the vehicle’s age, mileage, type and condition, we decide which route will provide the best return. All work surrounding the disposal of the vehicle is completed and managed by our preparation centre.

At present we are achieving 118% of the residual/disposal values, which is bringing our clients a profit of 18%.

 

Administration

A major factor when considering a hybrid lease is to remember that operationally and administratively it’s the same as a contract hire agreement.