At the end of 2000, two people occupied the executive office at PACCAR Leasing Co. — retiring president James L. Shiplet and incoming president Tim Henebry. FLEET OWNER had the opportunity to visit with them both about the evolving business of truck leasing.
FO: Jim, you were at the helm of the PacLease organization for more than 13 years. What are fleets looking for from leasing companies today? Has it changed?
Shiplet: The leasing business is essentially the same as it has been historically, but with some interesting new wrinkles. Customers still want service and efficiency. They want to be able to apply the assets they would have had invested in trucks to other aspects of their business. Especially with the twists and turns in the market these days, having the equipment assets on the leasing company's books, so that the fleet doesn't have to worry about residual values, is a big plus.
FO: As manufacturers expand the services available to truck buyers, do you see the distinction blurring between truck purchasing and leasing?
Henebry: Yes and no. Many fleets simply don't want to be in the trucking business anymore. They don't want to spec, buy, maintain and resell trucks. This is not only pushing the demand for vehicle leases, it is also driving the growth of truck purchase packages that include features such as guaranteed residuals and maintenance programs.
There are still some clear distinctions between purchasing and leasing, however, the major distinction being service on demand. Full-service leasing companies provide service on demand, and if they can't, then they usually provide a substitute vehicle. That is not the case with many new purchasing programs, which are addressing the cost side, but not the service-on-demand component.
FO: Over the past few years, we've seen some leasing companies “unbundling” the truck lease package in order to offer lessors an a la carte menu of only those services they want. Is this trend continuing? Or are leasing companies rebundling services in a swing back toward the full-service lease model?
Henebry: It depends on whom you ask. If you look at the numbers, full-service leasing had its strongest year in 2000 of the past four to five years. So to say that full-service leasing is dying is just not true. Unbundling leasing, however, is allowing leasing companies to tap into a much bigger market than they've been able to in the past.
There are a lot of private fleets out there, for example, that have their own shops and are reluctant to give up total and complete control of their vehicles to a full-service leasing company. But they would love a parts-purchasing program or an over-the-road preventive maintenance program.
FO: Do fleets generally turn to leasing when they want to control costs or downsize their operations?
Henebry: Yes, certainly, but leasing doesn't always have to mean downsizing. The strategy is also useful as fleets grow. For instance, a company may decide to open a new branch or terminal and decide that, even though they have maintenance facilities and staff at their headquarters, they really don't want to make the investment at the new location. As an alternative, they may try a managed maintenance program at the new location. It gives companies lots of flexibility.
FO: Do you see a time when a leasing company might provide information management services? Theoretically, just how “full” could full-service leasing go?
Shiplet: Information management does represent an area of potential opportunity. Historically, leasing companies like PacLease said, “You use the truck and we'll take care of the truck.” Functions like load tracking fell under the heading of “using the truck.” There's no inherent reason, however, why this boundary line can't or won't migrate over time.
Henebry: Providing timely information in a way that's easy to understand and use is becoming just as critical to the trucking industry as turning wrenches and changing oil. Leasing companies could assume that function, either directly or through strategic partnerships. It's a dynamic and exciting time to be in the business.
