During the May 13th City Council Finance Committee meeting, a representative of Enterprise Fleet Management introduced an Open-End Leasing program that could save the city $523,000 over ten years.
An open-end lease is also called a “finance lease,” which means that the program is a method of financing the acquisition of the assets. It is not a rental program. The City of Circleville would still own the vehicles that are entered into the program. The city could end the program at any time.
Members of the Finance Committee, Chair Katie Logan Hedges and Tom Duvall, were addressing the question: “How should the City of Circleville acquire vehicles for its fleet?” Currently the City is purchasing the vehicles and bearing the costs of maintenance. Under the Enterprise Fleet Management program, the City would sell the used vehicles to Enterprise and use the equity from the sales to reduce the cost of the new replacement vehicles being leased. The City would then make monthly lease payments and a fixed monthly fee for a maintenance plan.
The savings under this program would result from the purchasing power of Enterprise. It was estimated that, with the large number of vehicles that they purchase every year, they could purchase a police vehicle for $2,000 to $5,000 less, for example. They would be purchasing Dodge Durango SUVs as the replacement vehicles for the police fleet.
By moving to a two-to-three-year cycle of purchasing, the resale value would be maximized. Enterprise sells 1,200,000 used vehicles per year and they estimated that they get 10% more than the average “Black Book” value, the commercial fleet equivalent of the Kelly Blue Book for consumers.
When the entire fleet is on this two-to-three-year cycle of purchasing, the cost of maintenance would be significantly reduced. The newer vehicles would have improved gas mileage and thus there would be substantial fuel savings. The City would also benefit because the City maintenance and police fleet would be using newer, more reliable vehicles resulting in less downtime.
Enterprise Fleet Management can also provide a Wax Fuel Card that allows the user to obtain a lower price per gallon on each fuel purchase. But this was not included in the projected savings because the City already is a member of this program.
The City could still use the same local repair shops for any routine maintenance as these existing vendors are also members of the Enterprise program.
Not all of the vehicles in the Circleville fleet would be replaced. The two largest bulk trucks in the Circleville Service Department fleet would not be included. Enterprise said that their program would not offer any savings for the way the City purchased and maintained those two trucks. A total of 28 City vehicles would be in the program when fully implemented.
Mayor Michelle Blanton added that when all of the costs of getting a new vehicle into service, the license plates, registration fees, etc plus the costs of outfitting a police vehicle, are all included in the program at no extra cost, then the Enterprise program really would help the City get a s new vehicle into service mush quicker.
An open-end lease is a type of rental agreement that obliges the lessee (the person making periodic lease payments) to make a balloon payment at the end of the lease agreement amounting to the difference between the residual and fair market value of the asset. Open-end leases are also called “finance leases.”
The Finance Committee voted to move the matter to the full council for approval when it meets at 7 p.m. Tuesday, May 21 in Council Chambers.
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