What’s the Difference Between
a Municipal Lease and a Commercial Lease?
And why it matters–a lot! Make sure that you are comparing “apples and apples,” not apples and oranges.
The type of vehicle “leases” most people are familiar with (like we all see advertised on TV) are consumer or commercial leases. The monthly payments can be very attractive. Some are even promoted “use it and then just turn it in for a new one.” What’s the old saying? If it sounds to good to be true… Those very attractive payments come with a number strings attached—especially for government agencies like yours:
Typical Commercial Lease Restrictions
- Security deposits and/or other cash “due at signing,” are the rule.
- Low mileage allowance – 8,000-10,000 miles/year is typical–or be prepared for BIG penalties.
- Very short lease terms. 12-36 month “firm term” agreements. (Note: most cities cannot sign beyond the current fiscal year.)
- Lots of Fine Print – Lessee is responsible for every ding, dent, scratch, hole, upholstery or carpet stain, repainting and reconditioning. Whatever is necessary to make the vehicle commercially resalable for them.
- Maintenance requirements – The lessee is obligated to perform all maintenance during the lease term.
- Lease-End Buyouts — Know as “residuals.” This is money due after your last lease payment…the amounts can be substantial.
Here’s the “the math” behind commercial lease offers and it works like this: the financial institution purchases a new vehicle and “leases” it to your agency. 12-36 months is typical. The commercial leasing company’s key financial assumption is that they will ALSO be able re-sell your lightly-used, low-mileage, “almost new” vehicle at the end of the lease. The leasing company is “made whole” financially (i.e. they recover their original costs and profit) from two sources. 1) the monthly payments that you make. And 2) the money they make from selling your vehicles at the end of the lease. Will your government agency’s usage fit the commercial leasing company’s expectations?
Municipal Leases for Police & Sheriffs – More Flexibility & More Options
Compare First Capital’s municipal lease-to-own program, prices, flexibility and options to any other type of lease. Here’s why so many agency’s opt for a First Capital municipal lease rather than a commercial lease. Check these benefits.
- VERY LOW INTEREST RATES: Our tax-exempt municipal leasing fleet interest rates are typically less than ½ of commercial lease interest rates.
- Security Deposits: None. Only a nominal documentation fee is due at signing. The first lease payment can be up to 12 months after signing)
- Mileage Restrictions: None.
- Condition Requirements: None. (Install any equipment, drill holes, paint, stripe or modify the vehicle as necessary)
- Maintenance Requirements: None.
- Much Longer Lease Terms–3, 4, 5 and up to 6 Years. (Payments can be monthly, quarterly, semi-annually or annually—your choice)
- Leases Include “Non-Appropriation” language wherever required by law. (The lease can be terminated and the equipment returned to us in the event funds are not appropriated in any year, for any legal reason)
- Every Vehicles is Titled To Your Agency upon delivery. (Ownership transfers on delivery–your agency owns every vehicle and everything you install in it)
- Lease End: No buyout/no payoffs. Continue using the vehicles forever at no cost, OR sell them, OR trade them for new.
The fact is that our lease numbers sell themselves.
For most governments, spreading big ticket capital expenses over multiple budgets is a financial game changer!
Take a look!
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