Full service leasing also protects the lessee from unforeseen equipment failure, breakdowns, and the resulting downtime associated with that. Most agreements include access to replacement vehicles when repairs are needed. And while a monthly payment of $4,000 for the lease of a tractor and trailer may seem high to some small-sized businesses, owners should keep in mind that one single repair bill could far exceed that cost, not including the impact caused by downtime.
It's important that business owners, who are considering the lease vs. own option, determine if the lease of the truck will generate enough revenue and cash to pay for itself.
2010 Changes Loom
As the year 2010 approaches, business owners are staring down the barrel of new truck emissions regulations that bring with them a host of new considerations for those business owners thinking about the lease vs. own situation. All new trucks put into service in 2010 will be required to meet U.S. EPA emissions standards. While the goal of the new standards is undeniably beneficial for the environment, it does raise questions and concerns for current fleet owners anticipating the needs for new vehicles which might lead them to consider a leasing arrangement.
Do I know if the technology is fully proven? Do I employ enough properly trained mechanics with the skills to repair the new vehicles with the new technology and keep them on the road? Do I have a network of service providers in case I have breakdowns to get my equipment up and running? Am I able to get substitute equipment if my equipment breaks down? Do I have someone to manage the whole process? When the lease option is chosen, all of those questions - and their answers - become the concern of the leasing entity.
Budgeting properly for a fleet can encompass any number of considerations that add up to the true cost of ownership. These considerations usually include:
- Fleet logistics
- Staff management
- Preventive maintenance
- Technician training
- Emergency road service
- Safety programs
- Permitting and licensing
- Vehicle washing
- Substitute vehicles
- Fuel tax issues
- Full administrative support
With a full service lease or contract maintenance - which covers everything in a full service lease except the financing and ownership of the equipment - these considerations are included in a turnkey operation. And both enable company owners or executives to focus management, staff and financial resources on the firm's core competency. The true bottom line of leasing is it frees up a company to do what it does best, leaving the transportation business to the professionals.
Lease vs. Buy Worksheet
By visiting http://www.nationalease.com/gui/worksheet.asp and using the calculator at that site, visitors can see how much they could save by choosing the leasing option. Before beginning, the following information should be on hand in order to determine the actual anticipated costs.
- Opportunity cost calculation: Net profit after taxes; Total assets; Cash in trucks
- Depreciation calculation: Purchase price; Down payment; Salvage value; Terms in years
- Interest cost
- Annual registration cost
- Property tax
- Sales tax calculation
- Federal excise tax rate
- Federal highway use tax
- Annual inspection
- Vehicle insurance
- Maintenance facility
- Facility supervision
- Facility utilities, WC, OSHA
- Road service expense
- Environmental costs
- Lost time calculation: Average wages, Hours lost
- Maintenance calculation: Cost; Average annual miles
- Substitute vehicles
- Rental equipment calculation: Regular rental rate; Preferred customer rate; Number of weeks rented
- Identification Cost
- External cleaning: Number of washes; Average cost per wash
- Bulk fuel program
- Fuel tax
- Management cost calculation: Hourly rate; Hours per week
- Clerical cost calculation: Hourly rate; Hours per week
Gene Scoggins is president of NationaLease, the largest full service truck leasing organization in North America, with more than 600 service locations throughout the U.S. and Canada and a combined customer fleet of 125,000 trucks, tractors, and trailers. The website is www.nationalease.com.