"With the leasing program, if there are any problems with the trucks, you just bring them into the shop," says Miller. "They take care of it. You don't have to worry about it. If you need a loaner truck, they supply it." This eliminates downtime previously experienced with used trucks.
The contractor has changed its replacement strategy as a result of the truck leases. Trucks are leased for four years. "Then we make the decision that they can either stay in our fleet and be the hand-me-down to the newer guys," says Miller, "or we replace them."
There are advantages to purchasing the trucks at the end of the lease. "All of the depreciation has been taken off of the vehicle," Miller notes. "When you finally do decide to buy, it is coming on your balance sheet at a lower price."
You also know exactly what you're getting. "You have the history on it," Miller points out. "You have all of the maintenance records."
Spec'ing trucks is simplified
Prior to the leasing solution, Rockman LLC had a mixed truck fleet. "We had five different brands of trucks and three different motors," says Miller. "It was just a fiasco." Parts could be found for some models and not others. Some mechanics knew how to work on one brand of engine, but not the rest.
Now there is consistency in the fleet. "You try to spec everything the same," says Miller. For instance, all of the engines are Caterpillar. This fits with the Caterpillar equipment the company purchases through NC Machinery, allowing for a second level of support.
And the spec'ing process has been simplified. PacLease helped Rockman LLC to spec trucks to meet its unique requirements.
"We give our specs over to Kenworth and that's the truck we get," says Miller. "On one of our service trucks, we actually threw them a curve. We wanted a combination service truck and lube truck — not just for a lube person, but for a mechanic to drive it, too. So it has a few extra things on it. That wasn't a problem. They put it to our specs and we had it in about six weeks."
Does leasing make sense for you?
According to Miller, you can streamline your lease to what is best for your company. "We stay local within a three-county area. For us to hit any mileage barriers is almost impossible," he explains. "So for us, the biggest thing is keeping the warranties as long as possible on the rigs themselves. Our trucks will actually be covered under warranty until their leases are up."
However, before you investigate leasing options, you need to make sure leasing actually makes sense for your application.
"Leasing is both a financial and an operational decision," says Olen Hunter, PacLease director of sales. "Financially, customers can deploy capital in other parts of their business that will generate a higher return than investing in rolling stock. Rather than taking hard-earned capital and putting it into a depreciating asset, they can reserve that capital to grow into another market or expand their business."
Then you need to look at the operational side of the equation. "From an operational perspective, it also has to make sense" says Hunter. "If the customer feels they are doing a fine job purchasing, selling and maintaining their own equipment, then there is really not a lot we can offer. If they feel they could be doing better in any one of those areas, we need to talk. It goes back to core competencies. Do you want to be in the truck spec'ing, maintenance and sales business, or do you want to be a contractor leasing your trucks as a means to an end?"
Many of the leasing options include a maintenance package. "That is another good example of use of capital," says Hunter. "Does the contractor want to invest in a diesel truck shop and have to hire, train and retain technicians, which can be just as tough as hiring, training and retaining truck drivers? It is becoming a huge issue for staffing maintenance facilities."
Ultimately, the intention of the leasing option is to ease the fleet management process. "Leasing is all about trying to simplify a customer's transportation business," says Hunter. "They can focus on areas of the business that are core to them and get a higher return."
This is making leasing a more attractive option. "We see the vocational market as one of the fastest growing segments in our portfolio," says Hunter.