ARI’s Gernot Leinenbach Gives Advice on Reducing the Impact of Upcoming Interest Rates Increases
ARI’s Gernot Leinenbach, senior vice president of finance for ARI, discusses how to manage upcoming increases to interest rates, in a recent article posted by Automotive Fleet, ‘How to Reduce the Impact of Rising Interest Rates on TCO.”
With the Federal Reserve expected to raise its benchmark rate two more times in 2017, fleets using open-end leases may want to consider reevaluating their total cost of ownership (TCO) calculations. “The impact to TCO may be minimal, and companies should use interest rates as just one factor in a broad-based financial risk management strategy, said Gernot Leinenbach. “In our view, the goal should be to develop a consistent budgetary forecast and a reliable replacement model that supports adequate working capital and their cash flow needs, while meeting practical requirements of the fleet in the most efficient manner possible.”
Economic trends and changes to the interest rate environment are a part of a much larger equation. “In most cases, economic trends should not be the sole determining factor in making decisions about when to lease” said Leinenbach. Fleet managers considering these strategies should check with their company chief financial officer or treasury department before taking action.
You can read the full article here.