With transportation costs mounting, today’s grocery and foodservice distributors are more likely to lease dry and refrigerated trailers than they were in the past. However, cost reduction is only the tip of the iceburg in terms of the benefits.
“Fuel consumption is driving the trend,” says Don Durm, director of agency development, PLM Trailer Leasing Inc., Dallas. But conserving capital, reducing in-house maintenance and gaining flexibility are also advantages that make leasing a sound business choice—for both small and large fleets.
“Companies are looking at leasing as an alternative way of financing,” says Tom James, president and CEO of Truck Renting and Leasing Association (TRALA), Alexandria, VA,. “In general, they’re only in the transportation business to move their products.”
According to Dave Gilliland, vice president of branch operations, Great Dane Trailers, Chicago, “A large number of the foodservice trailers are bought through the leasing companies and they handle all of the maintenance. That way the foodservice companies can concentrate on their business.”
“The trend is also being driven by a need to retain capital and improve cash flow,” says Adriano Melluzzo, group director of industry sales, food and beverage of Ryder System Inc., Miami. Along with the need to retain capital, Melluzzo believes the Food Safety Modernization Act (FSMA), which is putting pressure on food companies to ensure the integrity of their product, is also a contributing factor.
“Grocery and foodservice companies in general are more likely to lease trailers today, especially if it comes with some type of service attached to it,” says Chris Maccio, director of sales, PacLease, Bellevue, WA.
“In today’s economy and today’s world leasing just makes better sense,” says PLM’s Durm.
Benefits Of Leasing
So how do you know if leasing a trailer is right for your company? Start by deciding how much time and expense you want to invest in your fleet.
“You have less concerns about down time and you can focus more on your core business,” says PacLease’s Maccio. “From a financial perspective, you can structure leases so that they’re off balance sheets.” Experts agree it is an advantage to be able to change the way leases are viewed on balance sheets.
1. Reduces risk: “One thing that leasing does for you is that it drives out risk; it’s risk mitigation,” explains PLM’s Durm. “It’s a lot more flexible than ownership.”
Experts point out that leasing is a way to ensure your costs are fixed. “There’s typically no down payment with a lease,” says Maccio, “so that you can conserve your capital for growth and other things that help you focus more specifically on your own business. If your core business is produce or groceries in general, or foodservice, then you should consider outsourcing the asset management to a professional organization that focuses on that.”
Melluzzo adds: “With a lease, no working capital is required to support your fleet. You avoid bank covenants and taking on the residual risk that comes with owning a vehicle.”
Additionally when your lease is up, you have the option to walk away from your contract. “You don’t have an asset at that point,” says Durm.
2. Help with maintenance: Maintaining your own trailer fleet can prove to be costly, time consuming and difficult as well. Leasing a dry or refrigerated trailer, can help alleviate this. “All of our lease programs are full-service turnkey programs that include services such as: maintenance, roadside assistance, and licensing, permitting, and fuel tax reporting,” states Ryder’s Melluzzo.
“A company, such as Ryder, has a vast network of more than 800 maintenance facilities in North America, which provide strong maintenance capabilities to service leased vehicles,” continues Melluzzo.