Trend shows more medium duty trucks going into full-service leases
According to R.L. Polk data, in 2013, 31 percent of medium duty trucks went into service as a full-service lease, or as a rental unit with a leasing company.
Looking at the five-year trend line, that’s a significant jump from 2009 when only 19 percent of medium duty trucks went in to as a full-service lease or rental unit, observes Olen Hunter, director of sales for Paccar Leasing (PacLease), is one of North America's largest full service truck rental and leasing organizations, offering Peterbilt and Kenworth equipment (www.paclease.com).
Why the move toward full-service leasing versus ownership? He says three core reasons: truck technology changes, conservation of capital and on-time deliveries.
CHANGES IN TECHNOLOGY
“Any time you see changes in technology, especially engines, you will also see price increases in equipment,” explains Hunter.
“Capital a fleet had budgeted to buy 10 trucks might now only pay for nine. So from a cash flow sense, that fleet must take a step back and see how it can still get 10 trucks.
“Leasing becomes a viable option as the company pays for the use of the asset, not its full value, which results in a lower monthly cost of operation. That’s the beauty of a full-service lease. It allows the preservation of capital.”
UPTIME
What’s more, Hunter says maintenance and uptime have been considerations toward the move to full-service leasing.
“In today’s environment, customers can’t be late with deliveries. With a leased vehicle, they can put the onus of providing uptime on their leasing company.
“With a leased unit from PacLease, for example, we ensure our customers have 24/7 service support and substitute vehicles if the need arises. For a company that wants the ultimate in uptime, I’d argue that a full-service lease gives them the best protection.”
SOME ADVANTAGES
Hunter says Paclease has found that once a company moves from ownership to leasing, it is reluctant to switch back to ownership.
The company “may have moved to leased equipment as a hedge against operating new technology – again, putting the maintenance and guarantee of uptime on the leasing company, but what they also found was all the headaches of ownership and maintenance disappeared. It’s why they continue to lease.”
Did the Great Recession and credit crunch also play a part in the move toward leasing? “It did to some degree,” says Hunter. “Banks became tighter with terms and conditions, which led many to consider leasing.
“The recession also gave pause to many companies to conserve their capital for growing their core businesses. Leasing reserves credit lines with banks.”
GROWTH OF TRUCK RENTAL
Another trend Hunter sees happening is an increase in rental business.
“When companies see an uptick in business, they can rent a truck for a few weeks to several months. That gives them the added capacity to handle the business, and then if the business is retained, they can migrate into a full-service lease.
“We see rentals as a leading indicator of the economy, and right now things are looking strong.”
