More companies turn to full-service leasing as an alternative for truck, tractor acquisitions
Apr 1, 2010 12:00 PM
“Companies that borrow money should be concerned with maintaining best-in-class ROA and ROI ratios,” Hunter says. “If your company has depreciating assets, like trucks for example, and you don't generate an improved return or profitability for each dollar you invest in those trucks, your financial ratio will be out of order not only for internal reporting, but also for all of your company's future financial needs.”
Creditors and lenders look at ROA and ROI ratios to determine a company's productivity and profitability. That's important because most companies have a limited amount of capital they can borrow. If they borrow that capital to acquire trucks, then it can't be used for projects or opportunities, Hunter says. Full-service leasing allows companies to use their leasing provider's money to finance the trucks. That leaves companies free to use their borrowing capacity for projects or other revenue-generating endeavors.
“Through full-service leasing, your company can greatly improve its balance sheet by minimizing the number of assets it's using to produce a certain amount of income or profit,” Hunter adds. “So, your company's balance sheet will look much more favorable.”
Full-service leasing can also reduce the costs of truck ownership. Hunter says many financial decision-makers are under the misconception that full-service leasing will cost their companies more than buying trucks and taking care of the maintenance themselves.
“That's not usually the case,” he says. “With a full-service lease, your company pays for the use of the truck, rather than the truck itself. That can mean a big savings in both time and money over ownership.”
In a lease, the cost of the vehicle, apportioned tax and license, finance charge (set interest rate for the lease term), and calculated cost-per-mile maintenance expenses, minus the calculated residual value determine your monthly payment.
Hunter says company owners, finance officers and fleet managers are usually surprised to find that the per-unit cost with full-service leasing is often less than the per-unit cost of owning their trucks and maintaining them.
“When we sit down with our customers, we ask questions to try to understand what drives their costs and then determine ways we can help them develop efficiencies in their operation through the right truck specification choices,” Hunter he says. “For example, we sat down with a fairly large steel distribution company based out of Los Angeles (California) and found that payload was the company's most important measurement of success. Every pound we could take off the company's leased truck was another pound of product they could haul to their customers.”
In the past, the company leased trucks from another leasing company that took more of a “one-size-fits-all” approach to their truck specification needs, he says.
“As a result of taking measurements of one of the company's trucks, we provided the company a Peterbilt 386 with an optimized wheelbase and durable, but lighter weight components,” he adds. “The optimized wheelbase and lighter weight components allowed the company to haul more steel and as a result the company made more money with that truck.”
Hunter says there's another misconception about full-service leasing among companies that own trucks. They often believe that by turning over responsibility of truck maintenance to a leasing company, they somehow will lose control.
“Nothing could be further from the truth,” he says. “Companies that have switched from truck ownership to leasing trucks from us have found that when we maintain their trucks, their operations department can concentrate on their core business, and in many cases, improve on-time delivery rates.”
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