What’s behind the growth of medium-duty leasing?
Changing consumer purchasing patterns, increased vehicle complexity, and higher purchase prices are some of the factors that have led to the growth of medium-duty trucks and truck leasing.
“Yearly increases in Internet purchasing means companies have to have a lot more inventory close to the people who are buying,” says Joe Gallick, Senior Vice President of Sales for NationaLease. “A lot of the growth in medium-duty has to do with rapid fulfillment,” Gallick says. “Customers are buying products with an expectation that they will be delivered quickly and these types of deliveries are more conducive to medium-duty trucks.”
The way fleets look at freight for medium-duty trucks has changed too. The focus used to be on achieving maximum cube utilization. Now, according to Gallick, “it is how many deliveries can fit on a truck.” Those individual deliveries tend to be smaller and lighter. “The objective no longer is to utilize the truck to weight capacity, the objective is to get products to consumers in a timely fashion.”
While changing purchasing patterns are what’s behind the growth of medium-duty trucks, Andrew Kanter, President of Passaic-Clifton Driv-Ur- Self System Inc., a NationaLease member, says, “Companies seem more motivated to lease mid-range diesel due to sticker shock. Government mandates have added an additional $15,000 to the purchase price of a vehicle in order to meet emissions requirements.
Max Bechina, Executive Vice President of Carmichael NationaLease, adds, “The fast rising cost of new equipment over the past 10 years has far surpassed our country’s soft inflation. With just one medium-duty reefer truck costing more than $100,000, a company that decides to purchase a fleet of three to five trucks realizes how quickly that can eat up lines of credit and borrowing base.”
Eric Roberts, President of AA NationaLease, believes leasing was once considered a luxury but is now ”considered an essential because of the complexity of the vehicles and the inability to obtain reliable service 24/7.”
In addition the cost of maintenance on today’s medium-duty trucks has risen as well as the need to invest in proper tooling. “If you don’t have a laptop with current diagnostic software and the proper training, you can forget about the guy around the corner getting a truck up and on the road,” Bechina says. “Today a technician needs to operate two sets of tools — a laptop and a tool box.” He believes that most smaller shops don’t have the necessary skills or equipment to complete the repairs and that dealerships often charge as much as $125 an hour just to plug a laptop into the truck.
Another benefit of leasing according to Mark Miller, Vice President of Miller NationaLease, is the availability of substitute trucks. “This allows companies to continue operating their businesses and servicing their customers even if the truck is down for a mechanical failure.”
Leasing also allows the owner of medium-duty trucks to concentrate on their core competency and relieves them of the burden of what to do with the truck at the end of its useful life. “Many companies that use medium-duty trucks are able to use dry and refrigerated trucks for the best parts of their lives, not have to worry about the disposal process and also don’t have to outlay large amounts of cash to purchase new trucks,” Miller says. “The ownership process is simplified over a defined term which allows the company to have the proper equipment to meet its current needs and have a defined budgetable expense each month for its transportation costs.”
Changes in consumer behavior have sparked the growth of medium-duty trucks and leasing is one option fleets are considering to help them deal with increased product complexity and higher purchase prices.
