Leasing: The Ownership Alternative
As the economy trends upward and companies find themselves poised for growth, fleet leasing may be a transportation option to consider.
Leasing is the easy way to meet your growing needs without making a huge capital investment or tying up all of your available credit. There are a variety of leasing agreements available from today’s top leasing companies that allow you to upgrade your fleet with the latest technology and simplify fleet maintenance.
Meeting Growth Demands
In 2001 Mims Meat Co. was growing steadily. Deliveries to restaurant customers, including multi-unit restaurants, were getting farther and farther from the company’s headquarters and warehouse in Houston. Dan Mims, president and owner of Mims Meat Co., had to add more trucks and a service program that could support them when far from Mims’ maintenance shop.
To ramp up its fleet quickly, Mims decided to lease trucks. Since 2001 Mims has leased a majority of its trucks through PacLease, headquartered in Bellevue, WA, and its affiliate in Houston, Rush Enterprises.
“We turned to leasing when our multi-unit business exploded,” Mims says. “It really stretched the number of miles we were traveling. We did it to maintain our customer service. If a truck breaks down in Texarkana, that’s a long way from Houston. I needed an organization behind me that could get trucks up and running as soon as possible so we could hit our delivery windows.”
Since 2006, Mims has leased up to 16 Peterbilt 379 tractors through a full-service lease with PacLease. Mims also owns one tractor and four straight trucks equipped with box vans. Mims’ decision to lease with PacLease enabled the company to handle its biggest growth year in 2006 when business soared by 20 percent. It was possible only through finding the right leasing agreement.
The Right Leasing Package
Mims was looking for the right combination of leasing terms and quality equipment and says he found PacLease to be the most creative in assembling the financial terms and conditions.
Mims says the PacLease decision process took place over about eight months, and involved heavy consideration of fuel economy, equipment reliability, driver safety, visibility and comfort, and maintenance. In the end, the PacLease full-service agreement was the best for their needs.
PLM Trailer Leasing of Montvale, NJ, serves a niche market by leasing only refrigerated trailers. The company has developed a variety of leasing options based on their customers’ ever-changing business needs.
Don Durm, director of agency development, explains PLM’s unique Mirror Leasing Program. “It literally mirrors whatever contract the foodservice distribution company has picked up. If it is a three year contract, we will lease to them for three years. Or if a storage trailer is needed for a year and eight months during a facility renovation, we can make a leasing program to fit that need. We mirror the customer’s challenge so they don’t have to pay for the asset any longer than they need it.”
PLM provides another leasing agreement called the Flexi-Fleet Program. This agreement allows customers to continually upgrade their equipment throughout the term of the lease.
“For example, if you currently drop off 80 cases per stop, you can start out leasing a 28-foot-trailer, but if your business grows to 180 cases per stop, you will need a longer trailer,” says Durm. “We allow them to do a contract change and switch their equipment to 36-foot-trailers without having them sign for a new piece of equipment and remain stuck with the asset.”
In today’s economy, companies may want to consider fleet leasing as an alternate source for financing. As credit requirements and bank lines tighten up, using the leasing company’s capital to purchase vehicles allows companies to use their credit lines and cash for expansions, mergers, acquisitions or other products that will provide a greater return on investment.
By leasing trucks, Mims Meat was able to update its fleet immediately without straining the corporate credit line, according to Mims. Buying 16 trucks would have been tough financially, he says.
Leasing allows companies to keep up with the latest technology, which can lead to driver retention.
“One of the reasons we went with Peterbilt and PacLease is because of the very competitive market for truck drivers. The better the piece of equipment you put them in, the easier it is to recruit,” Mims says.
To meet its customers’ need for current equipment, PLM offers a shorter than usual equipment cycle of five years.
“One of the things technology has improved is fuel efficiency,” says Durm. “Current reefers on the market get about .7 gallons per run time hour. A 10 year old trailer gets 1.3 to 1.4 gallons per run time hour. This can amount to savings of thousands in a very short period.”
Another fast-changing technology is trailer temperature monitors and controls.
Ryder System Inc. of Miami, FL, leases both dry and refrigerated vans. Adriano Melluzzo, director of food & beverage sales for fleet management solutions, says that since technology helps their customers adhere to food safety regulations, it’s important to use the latest equipment available.
“We’re starting to see an uptick on the refrigeration side because of the current and pending food safety regulations,” says Melluzzo. “There is a lot of product temperature monitoring that needs to take place in food and grocery when delivering perishable products. In order to meet the government’s and their customers’ requirements, they must have the latest and greatest technology in these trailers.”
To help keep up with the demand for temperature gauging, PLM offers a service called Cold Link. It uses satellite technology to monitor the temperature inside the trailer. If the temperature drops out of range for a certain amount of time, it will notify the user via their cellular device or desktop at the home office. Cold Link also allows the user to change the temperature of the trailer remotely from any computer or device linked to the service.
Fleet leasing is also an excellent way to simplify maintenance.
Maintenance On Demand
Depending on the agreement, many companies offer maintenance programs with their leases. Melluzzo explains how Ryder helps its customers focus on their primary business objective by taking care of maintenance for them.
“At Ryder we’re much more than a truck and a price,” says Melluzzo. “It’s what we offer as a value-add in our leases. We allow our customers to focus on their core business and outsource all the moving parts of maintaining a fleet. Once we come to terms over the financing of the lease itself, we marry our maintenance agreement with the lease.”
Maintenance is performed at a Ryder shop and includes all repairs, parts and labor. It also includes vehicle support services such as substitute vehicles for when a piece of equipment breaks down and road service if a vehicle breaks down on the side of the road.