Re-thinking Truck Ownership

View Point

Several years ago, many fleets thought owning their own trucks made the most financial sense. But numerous changes, including the increasing complexity of both heavy- and medium-duty trucks and tractors; stricter government regulations; and the need for financial flexibility have brought full-service leasing to the forefront.

According to the National Private Truck Council, Arlington, VA, around 50 percent of private fleets use some form of truck leasing. An annual survey conducted by the council shows an increase in the number of trucks being leased each year. Today, the profile of the leasing customer is evolving beyond manufacturers and distributors. In the past, customers were typically small- to medium-sized private fleets. But today, all types of fleets are discovering the benefits of full-service leasing.

More and more food distributors are considering leasing as a means to attract and keep good drivers and to deal with the shortage of qualified technicians. Operating a fleet of leased trucks helps companies get their product to market in a timely, reliable and cost-effective way, while leaving the maintenance of the vehicles to trusted experts.

More complex trucks to maintain: The trend to full-service leasing is expected to accelerate even faster in the next few years as the complexity of trucks continues to evolve. It's going to make maintenance and technician training an even higher priority. With those influences, more and more fleets will enter into a full-service leasing agreement. 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 maintenance to a trusted partner. It's the leasing company's job to make sure equipment is well maintained and running properly. 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. 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. 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 food distributors can afford to have a truck sitting on the side of the road for an extended period of time, particularly if it is loaded. Leasing helps eliminate this risk by increasing uptime. Many leasing contracts have a substitute vehicle feature that provides a replacement when needed.

At PacLease, if there is a down vehicle, we determine the nature of the problem and prescribe the best course of action to maximize uptime. Typically, the quickest solution is having the truck repaired at the roadside or taken to one of our more than 50,000 service points.

When it comes down to it, leasing is not only about providing a truck-it's about providing an efficient method for deliveries.

Coping with regulations: The work performed by 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. The outsourcing of maintenance, fuel tax reporting 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. 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 stable with prices reflective of market demands. But, will that be the climate in three or four years? You don't have to have a long memory to recall the over supply of used trucks on the market several years ago. It left many fleets upside down on the value of their trucks. 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.