It is an undisputed given that most all upscale hoteliers provide complimentary ground transportation for their clientele. It’s just a fact.
The question that management must address is to how best to fund this expenditure:
- A Lease? Which structure?
- Traditional Loan?
Let’s unpack this to help understand the options and address the ultimate questions to answer. Let’s start with the ultimate questions ~
How many miles per year will be driven? Why is this important? All else being equal, we need this to be able to solve for the cost per mile.
This is certainly not as difficult as you might think ~ Let’s take a look!
Here is a popular structure & a typical monthly payment:
4 year – 20% TRAC lease. Given this structure, the payment on a $40,000 passenger van would be $775.00 per month.
Now assuming 36000 per year in mileage / 3000 miles per month – the cost per mile is 26 cents per mile. ($775 divided by 3000)
(more about TRAC Leasing: http://www.leasing-101.com/2012.11Writ/TRACLeaseAnatomy.pdf)
The greater the number of miles, the less the cost per mile.
Yet, please know that leasing companies are well aware of this calculation, and at some point will limit the length of term or increase the monthly charge. Nonetheless, you will want to use the Cost per Mile Calculation to help to guide your decision. At some point, you may choose a different style of lease, or perhaps even a loan, to provide the lowest cost per mile for your organization. Of course, there are other considerations that will help analyze this simplified approach for your unique situation.
Other Factors to Consider:
- Income Tax Considerations (tax rates vary from enterprise-to-enterprise)
- Low utilization and holding the asset for a long period of time will usually suggest a loan rather than a lease.
- High Liquidity: If your organization is fortunate to have lots of cash on its balance sheet this will certainly influence your decision.
- Maintenance & Insurance … are they included in the lease cost? Be sure to include these in your equation.
For nearly 25 years, SLS has provided shuttle financing and leasing for well-known brands in the hospitality sector. With our efficient programs and uncomplicated products, we would enjoy the opportunity help you decrease your cost per mile on your transportation fleet. www.slsfinancial.com
To discuss your needs, contact:
Tel. Direct (816) 423-8021
Mobile (816) 863-3070