Understanding fleet leasing and the future of mobility

Getting a vehicle for your business is more than a simple purchase. You have to take into account insurance, getting the necessary licenses, maintenance and repairs, depreciation, parking and storage, not to mention the actual financial cost of purchasing one.

So naturally, the concept of fleet leasing and its growing popularity is to be expected. Similar to leasing properties or other goods, fleet leases offer a way to manage the complex financial and maintenance aspects of vehicle ownership, as many businesses simply cannot afford or do not want to shoulder that burden.

Fleet leasing involves temporarily renting a fleet of vehicles, such as trucks, vans, and cars, from a fleet management organization. This approach simplifies vehicle management by covering all aspects, including financing, maintenance, fuel management, and driver and safety management. This comprehensive coverage makes fleet leasing an ideal choice for smaller organizations or startups, as it reduces operational costs, enhances driver security, and improves work performance efficiency.

And, as leasing allows businesses to have the vehicles they need for a specified period, with most contracts being for a fixed term, this creates a certain predictability in costs and management that helps businesses plan their finances more accurately and avoid unexpected expenses.

Businesses can then focus on their core operations while leaving the intricacies of fleet management to the experts. This partnership ensures that all aspects of fleet management are reliable and consistent. For instance, overtime work is accurately recorded, and journey planning is made more efficient, enhancing driver awareness and safety during work trips.

“Today, fleet management in North America is a multibillion-dollar industry that is highly consolidated. The top five players combined make up for more than 90% of managed vehicles. Tomorrow, the relevance of this market will further increase due to multiple influencing factors,” multinational professional services firm Deloitte wrote in a report.

“More and more original equipment manufacturers will put their focus on this business as it is, or it will become an important sales channel for their vehicle sales,” it added.

Deloitte even noted that the growing popularity of fleet leasing, in the general context of the widespread transformation of the automotive industry, could open new opportunities for other industries like the telecommunication and tech “to expand their current entertainment, telematics, or mobility platform offerings.”

“The key strategic reason is that the fleet management industry will continue to evolve and become even more IT- and data-driven in the future. Deloitte foresees tech companies being in a unique position to take ownership of customer access and data (mobility, payment, etc.), which will be key to monetizing the mobility ecosystem,” the firm said.

“In addition, car rental companies and other mobility providers (such as mobility as a service [MaaS] providers) are tapping into fleet management, as this capability is one of the key enablers for nearly all future mobility services.”

For car rental companies looking into fleet leasing, it is not an easy shift, however. Managing a fleet of vehicles can already be a time-consuming and complex task. Much like property managers assist landowners with paperwork and operational tasks, fleet management organizations need to also provide valuable support in maximizing the benefits of their leased assets. These services might include everything from vehicle servicing to tire replacement, vehicle registration, and ensuring the fleet is always in optimal condition.

But Deloitte notes that for such companies, a shift in strategy is essential. Much more is needed. No longer can car rental companies merely act as asset managers; they must transform into integrated mobility providers, offering a suite of services that extend beyond the vehicles themselves.

Fleet management companies have a unique opportunity to deepen their relationships with their existing customer base. But to do this, companies must provide additional service offerings such as marketing finance and leasing products to clients who currently own their vehicles, providing them with compelling reasons to switch to leasing.

The rise of autonomous vehicles (AVs) also presents both a challenge and an opportunity, as companies now must build expertise in handling AVs, understanding their unique requirements, and managing AV fleets efficiently on a large scale if they want that competitive edge.

“The key to being successful will be operational excellence, both internally and in terms of services. Fleet managers need to focus on digitization, process improvement, operational efficiency, and competitive funding strategies. Investments in IT and data analysis capabilities should enable them to sell new and better services to clients like consulting with corporate functional fleet clients to manage overall savings in operational costs,” Deloitte said.

“Either way, to cope with these trends and changes in the industry requires bold strategic choices amidst uncertainty. Fleet management will continue to become a truly global business, despite strong regional characteristics.”

Such an outlook could very well apply to the Philippines, where of the total 109,606 car sales made in the first quarter of 2024, commercial vehicles accounted for 81,395 units — 60,302 of which were light commercial vehicles, according to the latest report by the Chamber of Automotive Manufacturers of the Philippines and the Truck Manufacturers Association.

In the long run, fleet leasing can add significant value to businesses. It equips them with the right vehicles and equipment to take on jobs that they may not have been able to handle before. Outsourcing fleet management allows businesses to enjoy the benefits of having a well-maintained, reliable fleet without the hassle of ownership.

Moreover, the growing presence of fleet management companies can provide additional services to commercial operations such as telematics and driver training, further enhancing the efficiency and safety of transportation and mobility in the country. These services ensure that businesses operate at peak performance, contributing to improved productivity and reduced downtime.

For businesses in need of industrial or commercial vehicles, fleet leasing presents a compelling financial choice. It offers a way to manage costs effectively, simplify vehicle management, and ensure reliable and consistent fleet operations. — Bjorn Biel M. Beltran