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Sale and leaseback transactions put cash in fleets' pockets

May 7, 2020
Sale and leaseback transactions not only help by freeing up cash, they also can help fleets with life cycle management of their assets, which is increasingly important based on current market conditions.

COVID-19 has caused many executives to focus on ways to retain cash. In a recent blog post, I talked about the importance of evaluating everything in your organization to try to find hidden cash.

While there are a variety of ways to get cash back into the business, one that makes sense today is a sale and leaseback. This strategy is where the owner of the asset sells the asset and then leases it back from the buyer. The seller of the assets becomes the lessee and the buyer of the assets becomes the lessor. Under this arrangement the seller-lessee treats the income from the sale as normal revenue and the lessor may take depreciation.

Sale and leaseback allows the seller to retain use of the asset but also frees up cash.

Sale and leaseback transactions not only help by freeing up cash, they also can help fleets with life cycle management of their assets which takes on increased importance based on current market conditions. If a fleet has vehicles across a range of model years, a sale and leaseback can help optimize the fleet.

Here’s how it would work:

  • The oldest assets would be sold
  • The assets in the mid-range would be put on short-term leases
  • Newer assets would put on long-term leases

This results in a rationalization of the asset replacement cycle and offers the fleet immediate cash at a time when many companies are seeking cash infusions.

In addition to the access to cash, a sale and leaseback will transfer the residual risk to the lessor, and effectively refinance the assets at a lower rate.

Given the realities of today’s market, with its uncertainty and low used truck values, sale and leaseback may be a good option to not only bring in cash, but also to prepare fleets for the tough economic times ahead.

About the Author

Patrick Gaskins | Senior vice president, Fleet Solutions

Patrick Gaskins is a financial services professional serving the transportation industry for over 30 years. Gaskins earned his BBA in Finance from the University of Miami, FL in 1989, and received his CTP certification from the National Private Truck Council in 2002. He has held positions with GE Capital, TCF Equipment Finance, and various small independent lessors. 

He began his career with Corcentric in 2010 as Vice President of Financial Services, was promoted to Senior Vice President of Sales and Operations, and is now taking the role of Senior Vice President, Fleet Solutions.  In his new role he will lead Corcentric’s Captial Equipment Solutions, Fleet Procurement, Supply Management, and Remarketing teams. Gaskins will bring to the Fleet practice his expertise in developing data driven solutions to complex transportation transactions, driving efficiencies, and reducing expenses for Corcentric’s customers.

The Fleet Solutions practice leverages technology and the purchasing power of over 1,700 member fleets operating approximately 800,000 assets to provide its members with access to cost effective national account purchasing programs, fleet financing, asset management, and remarketing services.

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