Leasing a new vehicle is stressful.
Leasing more than 90 new vehicles is – cost efficient?
The city of Spokane plans to expand a pilot program that aims to dramatically reduce the age of its fleet of hundreds of vehicles.
City officials believe a proactive replacement plan would minimize long-term maintenance costs and increase fuel efficiency of the city’s vehicles.
It’s a new approach in a city that has made a habit of putting off the acquisition of a new vehicle until the old one is beyond repair. The average age of a vehicle owned by the city of Spokane is 11 years.
And if the city continues to buy replacement vehicles at its current pace, it won’t fully replace its fleet for another 21 years.
Enterprise Fleet Management, a division of the well-known rental car company, offered the city a lease plan to replace its vehicles at a more rapid pace, which it argues could save Spokane $3.6 million over the next decade.
The company outlined its proposal to the Spokane City Council’s Public Infrastructure and Environmental Sustainability Committee on Monday.
The idea is to replace vehicles not when they’re dead, but when the city will get its best return by selling and replacing it. This approach, Enterprise argues, is actually more thrifty because it reduces the cost of maintenance and puts city workers in newer, more fuel-efficient vehicles.
The lease is not like one that a traditional customer would sign at a local dealership. There are no mileage restrictions or wear and tear penalties. In this case, the leftover equity invested in the vehicle returns to the city when it’s sold.
“We’re just financing the vehicle down to a balance, rather than 0,” said Joe Hatcher, an account executive with Enterprise. “All of the equity above that balance is property of the city.”
In other words, according to city CFO Tony Wallace, the city has incentive to sell the vehicle when its resale value is above the amount still owed on the lease.
For the program to have the most benefit, the city will target “vehicles that will have a projected value higher than the balance of the lease.” That means excluding vehicles like police cruisers.
“As would be expected, pursuit vehicles are heavily used and typically have very low to no value at the end of their depreciable life,” Wallace said.
Purchasing 96 new vehicles would be costly, but leasing saves the city the up-front cost and allows it to invest that capital elsewhere.
The company also argues that an updated fleet of vehicles is a safer one. Many of the city’s vehicles predate the standardization of safety features like anti-lock brakes, electronic stability control and rear facing cameras.
The city has tested the model in its Parks and Recreation division for more than a year, replacing five Ford F-250 pickup trucks. Thus far, it has received positive feedback from Parks officials.
Mark Buening, director of budget and finance for Parks and Recreation, said putting off capital expenses “is never cost effective, although it is very, very easy to do.”
Spokane City Council President Breean Beggs echoed that sentiment.
“There’s some nice accountability built into the (leasing) system, I like that,” Beggs said.
The Parks Department has yet to sell a vehicle and roll the equity into the acquisition of a new vehicle but will eventually do so, Buening said.
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