Sparkfund's customer wanted to electrify their fleet, but did not have the capital flexibility to purchase the vehicles outright or take on additional debt to complete the transaction. Sparkfund purchased the vehicles from the OEM, who sold the vehicles at a discount due to HVIP credits, and leased them to the fleet operator as part of a sale- leaseback agreement to provide off-balance sheet financing.
The OEM Sparkfund worked with was looking to close the deal within the first quarter for revenue report. The time sensitivity of the deal and Sparkfund's lack of experience with vehicle purchasing, registering, and leasing vehicle's posed a prohibitive challenge. To overcome this challenge, Sparkfund worked with a third party California-based dealership to register and title the vehicles in California. Additionally, they bolstered their legal team's knowledge of applying for state incentives while taking advantage of existing underwriting and billing capabilities to expedite the contract.
Using an operating lease for the vehicles allowed Sparkfund to directly benefit from HVIP incentives and help their customer upgrade their fleet with off-balance sheet financing. At the end of the lease, their customer can purchase the vehicles for $1, allowing them to continue offering electric vehicles to their customers in the future.
To complete this transaction, Sparkfund entered into a master sales agreement with the OEM. To do so, Sparkfund combined $500,000 of their own capital with CA HVIP credits obtained by the OEM to purchase the EV vans at a comparable price to standard diesel vans. The HVIP credits reduced the total purchase cost by nearly $350,000.
After purchasing the vehicles, Sparkfund entered into a sale-leaseback agreement with their customer for a 60-month term with a 10% down payment and security deposit. At the end of the term, their customer will have the option to purchase the vehicles from Sparkfund for $1. Sparkfund provided their in-house underwriting services and the financing contract. Additionally, they took on the role of filing liens and are handling all ongoing billing and servicing.
The sale-leaseback agreement used in this deal allowed their customer to take advantage of Sparkfund’s capital and upgrade their fleet without raising additional capital or increasing the debt burden on their balance sheet. The increased costs from leasing the vehicles were offset by the lower operating costs of the vehicles themselves and a sales subsidy offered by one of the fleet operator’s customers.
Sparkfund’s customer upgraded their fleet with FT3-120 battery electric vehicles. These fully electric vehicles reduce local air pollution and can be charged using renewable energy sources. Sparkfund also helped the fleet operator install EV charging stations at their facilities as part of the lease agreement, allowing them to build their capacity for owning more EVs in the future.
List of Technologies Applied
- Electric Cargo Vans (FT3-120 11000GVWR)
- 7.2 kW AC EV charging cord
- 12-V/15A/1P EV chargers
- NEMA 5-15 & 14-50 Charging adapter
- LCD EV Charger displays
California’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) -– HVIP plays a crucial role in the deployment of zero-emission and near-zero-emission technologies. HVIP accelerates commercialization by providing point-of-sale vouchers to make advanced vehicles more affordable. Launched by the California Air Resources Board in 2009, the project is part of California Climate Investments. HVIP is the earliest model in the U.S. to demonstrate the function, flexibility, and effectiveness of first-come first-served incentives that reduce the incremental cost of commercial vehicles.
The attractive combination of off-balance sheet financing provided by Sparkfund and $346,500 of California HVIP credits allowed their customer to upgrade seven of their diesel vans with new EV cargo vans. Assuming a 12-year useful life, the EV cargo vans will have an estimated 60% lower carbon footprint than the diesel vans they replaced have an estimated 60% lower lifetime GHG emissions. The EV vans will also improve their customer’s NOI through lower operating costs ($0.20 saved per mile driven) and a 25% sales premium from customers for using electric vehicles for deliveries.
The Alternative Fuel Life-Cycle Environmental and Economic Transportation (AFLEET) Tool for Clean Cities Coalition stakeholders is an online version of AFLEET that compares new alternative fuel vehicles to gasoline (light-duty) and diesel (heavy-duty) vehicles.
