What fleet lessors need to do to ease lessees’ transition to the new lease accounting standard
At the International Auto Finance Network conference in May 2016 Paul Lippitt and Andrew Charlton from Lex Autolease demonstrated that the real challenge of the new lease accounting standard for lessees that have many motor leases lies not in the P&L and balance sheet changes - which are relatively immaterial compared to companies with large property lease portfolios for example - but in dealing with the accounting administration for each leased car.
Unlike the management of other assets (like IT servers) which can be managed and accounted for as a whole (and are unlikely to change during the term of the lease), they argue that cars need to be tracked individually because contracts are often amended or terminated early when staff move job or leave the company.
The priority for proactive fleet lessors, Lex argues, is to help lessees minimize the additional work to manage their motor leases.
The lease accounting changes may well accelerate the adoption of new models of mobility
You can find out more about how Lex intend to help their customers manage the transition by watching the complete video presentation.
Lex point out that “The vast majority of customers have told us that they will stay with leases provided we supply them with the right management information”. They supply examples of what sort of data they think is needed.
A handful of customers however still ask if Lex can provide alternatives – seeking a single fixed cost that will be charge to the profit and loss as before. For these customers, the lease accounting changes may well accelerate the adoption of new models of mobility.
As with most areas in fleet leasing these days, technology has a clear role to play – and lessors that are looking for imaginative ways to add value to their client relationships may well consider providing lessees with the software they need to manage their fleet accounting, in order to remove the challenge and complexity.