High Interest Rates Create Momentum for Vehicle Leases

Following pandemic-induced supply chain disruptions in 2020, the electric utility industry found it difficult to secure large utility vehicles due to manufacturing delays, steep cost increases and a rising interest rate environment. These delays and increased costs caused electric cooperative leaders to reconsider how they approached replacing their aging fleets of utility trucks. 

“We were looking at purchasing several large new utility vehicles at one time, which drastically affects cash,” Coosa Valley Electric Cooperative Chief Financial Officer Kim Maye said. “We decided in 2022 to start leasing vehicles to manage cash flow since we were also heavily involved in building out a fiber network to all our consumers.” 

Talladega, Alabama-based Coosa Valley Electric Cooperative leased its first vehicle in December 2022 and found it a better way of managing cash flow as it worked through numerous large-scale projects that were stressing its aging fleet.

“CFC has always been a great partner for Coosa Valley Electric,” Maye said. “When we first considered leasing, I had heard CFC was beginning a new leasing program. Once the program was explained to me, I knew immediately it was another partnership that Coosa wanted to be part of with CFC. We were already working closely with CFC on funding our fiber buildout, so it made sense to also go with them on their new leasing program.” 

CFC launched the new leasing program in 2022 through its affiliate, National Cooperative Services Corporation (NCSC), to provide additional lending solutions to meet members’ financing needs for vehicles and equipment. The new service provides a lower lease rate compared with other financing programs and is managed by NCSC staff that handle all aspects of the leasing process. 

“Our objective is to provide our members with a streamlined and competitive leasing solution,” CFC Senior Vice President and Chief Financial Officer Ling Wang said. “We work closely with members throughout the entire process from underwriting and initial set-up, to the completion of funding, efficiently and seamlessly. We are pleased to see the leasing program gain momentum as more members evaluate their options for financing new vehicles and equipment.”

The program offers two types of leases: Terminal Rental Adjustment Clause (TRAC) and Early Buy Out (EBO). TRAC leases can be used for bucket trucks, digger derricks and electric vehicles (EVs) while EBO leases can be used for solar panels and EV charging stations. Each lease can be tailored to fit members’ needs.

Maye offered the following advice to other electric cooperative chief financial officers considering leasing options, “Reach out to CFC and let them present their leasing program. They have leasing options to fit any cooperative. Today’s leasing options are not anything like leasing vehicles 10-plus years ago. I was totally against leasing back then, but I have found it works great for Coosa Valley Electric Cooperative.”