EDITOR’S NOTE: The following feature, which compares truck ownership with full-service leasing, is written for the construction industry. Versions for other industries that can benefit from full-service leasing, including long-haul trucking, local pick-up and delivery, waste hauling, fuel hauling, and delivery and food and beverage distribution, are available upon request.
Owning your own fleet of mixers, dump trucks and lowboys is an age-old way of doing business. At least it was. Now, owning is not the only option – some full-service leasing companies are offering trucks and finance packages that make leasing an attractive option.
“Today, the profile of the leasing customer is evolving beyond manufacturers and distributors,” says Bob Southern, president of PACCAR Leasing Company (PacLease). “In the past, customers were typically small- to medium-sized private fleets,” he says. “But today, all types of fleets are discovering the benefits of full-service leasing – especially construction companies who historically had full-service leasing unavailable to them. For us at PacLease, the door is wide open and the response we’ve seen from early adopters has been good. Leasing brings financial liquidity and offloads maintenance to the leasing company. Even though vocational equipment and bodies can be complex, we have the expertise to keep them running which improves the productivity and profitability of our customers.”
More Complex Trucks to Maintain
The trend to full-service leasing is expected to accelerate even faster in the next few years as technology in trucks continues to evolve. It’s going to make maintenance and technician training an even higher priority. “Those influencers will help drive many to consider a full-service lease,” predicts Southern. “If you’re running fewer than 50 trucks, it’s going to be increasingly difficult to justify your own shop.
“Bottom line, with new technology in trucks, full-service leasing allows you to off-load truck maintenance, and in many cases the body, to a trusted partner. It’s the leasing company’s job to make sure equipment is well maintained and running properly,” Southern says. “You insulate yourself from unpredictable or erratic maintenance costs. That burden is shouldered by the leasing company.”
Shortage of Technicians
Fleets owning and maintaining trucks must deal with a growing shortage of qualified technicians (it’s predicted that 38,000 more technicians will be needed each year through 2010). “The shortage isn’t going away; if anything it’s going to get worse,” says Don Porthan, PACCAR Leasing’s manager of maintenance. “Fewer and fewer people have entered this field. It’s no longer a wrench-turning business. It now requires trained professionals using computers and electronic diagnostic tools.”
For leasing companies, the cost of hiring and training technicians is spread over a larger number of trucks. Efficiency is in the numbers.
“With mandated and ongoing education and training programs, technicians working for leasing companies are among the best in the business,” Porthan contends. “By leaving truck maintenance to a leasing company, customers enjoy well-maintained equipment without the expense and liability of operating their own shop.”
Avoiding Downtime
In the world of just-in-time deliveries, few fleets can afford to have a truck sitting on the side of the road for an extended period of time, particularly if it is loaded. It doesn’t take long for cement to set in a mixer barrel. Leasing helps eliminate this risk by increasing uptime. Many leasing contracts have a substitute vehicle feature that provides a replacement vehicle when it’s needed. They can also offer “stand by” emergency repair if the load can’t leave the truck.
“When it comes down to it, leasing is not only about providing a truck — it’s about providing an efficient method for deliveries,” says Southern. “Our customers are looking for a solution that assures an exceptional level of transportation service. PacLease focuses on preventive maintenance to avoid unplanned downtime and leases only the highest-quality, award-winning Kenworth and Peterbilt trucks spec’d for vocational applications.”
Coping with Regulations
The work of technicians is more critical today than ever, but just as important is their understanding and training in dealing with government-mandated environmental regulations. And with every passing year, these regulations continue to grow in size, scope and complexity.
Today’s truck fleet manager is faced with numerous compliance activities that can easily command several hours a day. “This is time that could be better used elsewhere,” says Southern. “The outsourcing of maintenance and other activities frees a manager’s time for his or her primary business.
“And, don’t forget the time involved in working with regulators,” Southern says. “Are you sure that you’re up to date on the criteria for each of the states in which you operate? Are you confident that the practices in your shop are in compliance with federal, state and local regulations? More and more companies are concluding that shifting these responsibilities to a third party may be a sound business decision for their company.”
Avoiding ‘Stranded Assets’
One last thing to consider: the crystal ball. Owning trucks is a bit like timing the stock market. Hit it right when it comes time to sell, and you’ll reap high residual values. If your timing is wrong, the value of your equipment may be too low to make a much-needed move to new trucks.
“Right now, the used truck market is strong with prices reflective of market demands,” says Southern. “But, will that be the climate several years from now? Today, we’re seeing fleets are more concerned about preserving the value of their investments. Leasing is an ideal way to remove the uncertainty of the used truck market from the equation. Plus, a leased truck has a greater chance of holding its value because of its maintenance record.”
Given these changing times, you must evaluate all aspects of your business including transportation. A lease/ownership analysis helps determine the best fleet strategy for your specific needs. “From our perspective, there has never been a better time to lease vehicles,” concludes Southern. “We take the risk out of operating a fleet of trucks and that’s a comforting notion for our customers.”