Even before Covid-19, many public sector bodies were struggling with budgetary pressures, the pandemic has made this significantly worse.
Increasingly public sector organisations are looking towards finance institutions to help meet the growing resource and service demands of their communities. With interest rates at historically low levels, now is a good time for private institutions to help local authorities to bridge this funding gap.
Leasing is re-emerging as an attractive source of finance
Leasing key assets such as specialist vehicles and light commercial vehicles on flexible and affordable terms helps public bodies to spread the cost of these assets over a longer period (typically five to seven years), and to lock into the current low cost of borrowing. The rentals are fixed upfront and are typically paid annually in advance, but other payment options are available.
Essentially, a private investment business (the lender) purchases the initial, high value asset (chosen by the customer), and then leases it to the public sector organisation on flexible and affordable terms. The public sector gains from no initial capital outlay, increased affordability and flexibility, as well as the additional benefit that operating leasing costs come out of the organisation’s revenue (rather than capital) budget.
Sale and Leaseback
Vehicles already acquired throughout the last year can also be converted to lease by way of a sale and leaseback transaction, thereby replenishing the finances of the public sector body. During February and March many Council’s across England, Scotland and Wales collect up the invoices for vehicles acquired throughout the year and refinance them with a known specialist leasing company, such as those on the YPO framework.
The YPO Framework can be utilised to access pre-approved leasing providers
In 2019 YPO ran a comprehensive tender to set up a Framework for the supply of purchase, hire and lease of specialist vehicles and associated services, with a dedicated Lot for the provision of vehicle lease finance. Using this framework to access finance for the acquisition of new vehicles is simple, safe, and competitive (with a mini competition being run for each new leasing requirement).
Assets Typically Leased
It is usual for public sector bodies to lease (rather than buy) a range of vehicles and assets including refuse collection vehicles, gully emptiers, gritters and snowploughs, minibuses, tippers, lorries, mobile libraries, tractors, trailers, access platforms, ambulances, fire engines, and vans.
Increasingly we will also see leasing help Council’s transition to electric or hybrid vehicles, spreading these costs over the expected life of the vehicles rather than having to find huge capital sums upfront.
Understanding the Public Sector
Specialist leasing companies understand the practical and financial needs of Councils. Mowing Tractors will need to be ready in the spring, ambulances are usually working intensively during the winter months as are gritters and snowploughs. The lease end dates can be adjusted to ensure that vehicles do not need to be returned just before, or during, their busy periods. The expected mileages of these vehicles will reflect their location, and the size of the area covered by the Council, and again the lease terms can reflect this.
Unlocking the potential in communities
In the absence of surplus government budgets, private financing such as leasing has a pivotal role to play in helping local bodies deliver the facilities and resources they need. But it can go beyond this. If authorities can tap into this opportunity in the right way, it can add significant value to their communities, allowing them to provide the type of infrastructure and services that they truly need.
If you have any questions or would like to know more about our Specialist Vehicles framework and how can YPO can help, get in touch with the team!