A buyback or leaseback program allows companies to free up capital by selling their fleet vehicles to a leasing company and immediately leasing them back. This provides an injection of cash while removing the depreciating assets from the balance sheet. The transaction involves agreeing on fair market sale prices, then drawing up a leasing agreement. The vehicles are sold but remain in the company's control through the operating lease. Benefits include an instant cash infusion that can pay down debt or bolster reserves, while leasing provides predictable budgeting and fleet management services. Companies should evaluate if a buyback program makes financial sense for their size and needs.

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FREEING UP CAPITAL THROUGH BUYBACK PROGRAMS
In a tough economic climate, it’s critical that organizations have adequate cash on
hand. It’s also important that a firm’s assets and liabilities balance out. One way many
organizations satisfy both of these requirements is through what is commonly called
a fleet buyback, or leaseback, program.
WHAT IS A BUYBACK PROGRAM?
Essentially, a buyback program allows companies that own a fleet of vehicles to free up
capital by selling the vehicles to a leasing company and then immediately leasing them
back through an operating lease. It’s often a highly effective and expeditious way for a
company to get an injection of needed cash while simultaneously removing depreciating
assets from the balance sheet.
HOW IT WORKS
A buyback program is a very straightforward concept. A company that wishes to sell its
fleet must first reach an agreement on a fair market price with the buyer. Fair market price
is typically based on vehicle makes and models, mileage, wear and tear, and a variety of
other considerations. Next, a leasing agreement is drawn up, taking into account the age
of the vehicles, terms and conditions, length of the lease, and value of the vehicles. Once
an agreement is in place and both sides are satisfied with the sale and lease terms, the
vehicles are sold and are no longer the company’s property.
Immediately upon completion of the sale, the operating lease with the new owner begins.
Since all transactions are on paper and the vehicles never physically change hands, the
fleet can continue to operate seamlessly and without interruption. The vehicles remain in
day-to-day possession and control of the original company.

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FREEING UP CAPITAL THROUGH BUYBACK PROGRAMS
THE BENEFITS
The chief benefit of a buyback transaction is the instant injection of cash into a business,
without the need to take out a loan or dip into credit lines. The amount of new cash, of
course, depends on the size of the fleet and value of the vehicles. The cash can be used for
a variety of purposes, such as paying off debt, reinvesting in other areas of the business, or
simply bolstering cash reserves and strengthening the balance sheet.
Also, a buyback lease allows for more streamlined and predictable budgeting. Most leasing
companies offer a number of management services—including maintenance, roadside
assistance, insurance, and fuel programs—that let companies set their budgets more
accurately, giving a clearer financial picture of ongoing costs.
LOOK BEFORE YOU LEAP
Not all companies are ideal candidates for buyback lease programs. Consult your
accountant or financial staff to determine if such a transaction would be beneficial.
The larger the fleet, the larger the financial benefit, but the more complicated and time-
consuming the transaction can become. It’s important any company considering a buyback
program find a reputable leasing partner and work with that partner diligently throughout
the process to avoid the possibility of vehicles being undervalued in the transaction.
The chief benefit of a buyback transaction is the instant injection
of cash into a business, without the need to take out a loan or dip
into credit lines.

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