Traditionally, Class 8 trucks used in construction have been spec'd for a particular application and then purchased. But leasing is emerging as an attractive alternative. It keeps the vehicles off your balance sheet, freeing up capital for other expenses or investment opportunities. It also can reduce the need for service technicians, and allow the use of newer, more efficient trucks that are covered by a preventive maintenance program and warranty.
Consider the case of Lake Stevens, WA-based Rockman LLC. The company integrates quarry, aggregate hauling, site clearing, earthmoving and utility installation operations, serving as a one-stop site development contractor.
"The customer could just make one phone call and the next time they have to talk to anybody is when it is time for the concrete," says Chris Miller, non-managing member of RLF Millery Quarry, LLC (DBA Cascade Quarries).
"Everything is done, and you did it with one phone call and one vendor." The customer also works with a single management team. "You don't have to go looking for five or six other people or companies to try to figure out what was going on with the project. It makes it easier for us, too. We have control of the project."
This unique business model has resulted in rapid growth. "We have seen a $20 million growth in the company in three years," says Miller. He credits much of this success to careful growth management.
"You see the brass ring and you always think you can do a little more," Miller notes. "The big thing is to be careful to not overextend and get to where you can only do a good job at 80% when you want to do 100%."
This means getting the right people in place and trained before expanding, as well as avoiding over spending on equipment purchases.
Starting with used
Rockman LLC had a humble beginning with its three partners, Jerry Perkl, Chris Miller and Scott Miller. "We started our company with nothing," recalls Miller.
At first, the company operated its aggregate hauling business as a truck brokerage company. "As a small company, we were spending over a million a year for trucking services," says Miller. The company eventually re-evaluated its position and purchased a few used trucks and hired a mechanic.
The first used truck the partners purchased was a 1970 model with a 350-hp engine and a broken motor mount. Then they progressed to used models from the 1990s. "They were somebody else's hand-me-downs. [The previous owner] got rid of the trucks because they worked them hard," says Miller. The results were less than ideal. "They were down all of the time," he says.
Then the local Kenworth dealer, Kenworth Northwest PacLease, took the initiative and approached Rockman LLC with a leasing option. "One of their salesmen came to us and said, ‘Your truck is in the shop a lot. Have you looked at this lease program?' " recalls Miller. "When we looked at it, my first thought was it is $3,400 a month for a truck and trailer. That is a lot of money." But when he realized he just had a truck in for repairs that cost $4,100 — not including the downtime — a light went on.
Leasing promotes growth
Today, Rockman LLC's fleet consists of a large number of Caterpillar construction equipment, as well as about 24 heavy trucks, including water, lube, dump and service vehicles. Ten of the trucks are under the a PacLease lease program. Eventually the program will encompass 100% of the truck fleet. "Everything goes to the leasing program now as [the trucks] get older and are replaced," says Miller.
The leasing option has provided many benefits. One example is a set monthly payment. As other costs fluctuate, the cost of leasing the trucks remains fixed. "It is off your books, which is kind of nice because you are not carrying that liability," says Miller.
"[The trucks] are new, so you don't have to worry about the warranty," he adds. And Rockman's two mechanics can now focus on the heavy iron since truck maintenance is provided through the lease.