From left, Don Baker, maintenance technician; Mike Shullenberg, equipment service specialist, and John Culley, senior maintenance technician, work on a dump truck in Everett, Wash. Due to improved maintenance, the average age of these trucks rose from 6.55 years in 2001 to 8.5 years in 2005. Photo: City of Everett, Wash.
The lease-purchase option
One way to make leasing work in your favor.
When Fresno, Calif.'s fleet management division has to lease equipment or vehicles because of a temporary capital shortage, the city takes on lease-purchase contracts that result in ownership.
That way, the city can extend the life of the equipment beyond the term of the lease. In the additional years of life, the city builds capital for a replacement, says fleet manager Jim Schaad.
To lease equipment ranging from a forklift to police cars, Fresno maintains a master lease agreement that works like a line of credit. The city's finance department has negotiated the credit at an attractive interest rate. And the department tracks its loans to make sure funds are available to pay off leases.
For high-volume equipment such as pickups or refuse trucks, the city writes long-term contracts that last two or three years. Naturally, vendors submit competitive bids. And they can offer volume discounts because quantities are higher over the term of the contract.
“That way if we total a refuse truck, we can go quickly to our supplier and get one at a predetermined price that we agreed upon,” says Schaad.