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The truth about unbundling a lease

Aug. 29, 2022
Doing so means a fleet can shorten the life cycle of a truck and exchange it for a new vehicle, avoiding the higher cost of operating an older asset. But there is economic risk in this practice.

Lately, there seems to be a great deal of talk about the benefits of unbundling a full-service lease. The thinking is that by doing so, the fleet can shorten the life cycle of a truck and exchange it for a new truck, thus avoiding the higher cost of operating an older asset.

At times, this can be a valid argument, but Joe Gallick, senior VP of sales at NationaLease, said this premise is only true when all the necessary economic conditions align. But there is a significant element of economic risk that the lessor needs to weigh into the decision. Two key factors come into play.

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First is the assumption that interest rates in the future will be fairly constant or trending downward. The second assumption is that the inflationary cost of capital equipment will be reasonably low in the near-term future.

History shows that over the long term, asset cost inflation is fairly predictable and in line with both the Consumer Price Index and the Producer Price Index. However, the trucking industry is susceptible to price surges resulting from greenhouse gas emissions regulations that require new technology and componentry on vehicles.

An imbalance exists between global supply and demand, which has led to price inflation. No one is willing to speculate on when the supply chain issues will be resolved. Fleets ordering trucks are experiencing long wait times for delivery, and OEMs are once again talking about allocations for 2023, indicating that fleets may not get all the trucks they order.

See also: The truth about cost per mile, leasing

This means fleets will be forced to keep older assets operating for longer periods of time. Older assets incur higher maintenance costs, which the fleet will have to bear if they choose the unbundling route compared to staying with their full-service lease.

Firms advocating for unbundling want fleets to believe that maintenance costs do not play a role in a fleet’s financial analysis. Given the technological advancement on trucks in the areas of safety, fuel efficiency and environmental sustainability, repairs cost more and require a highly trained technician workforce—which is getting increasingly difficult to find. One benefit of a full-service lease is moving responsibility for vehicle maintenance and repair to the full-service lessor.

A full-service lessor is a fleet’s strategic partner and works with the fleet to identify all the components needed to determine total cost of ownership and to find customized solutions that best fit a fleet’s operating needs and lead to the best TCO for each fleet.

Jane Clark is vice president of member services for NationaLease. In this position, she is focused on managing the member services operation as well as working to strengthen member relationships, reduce member costs, and improve collaboration within the NationaLease supporting groups. Prior to joining NationaLease, Clark served as area vice president for Randstad, one of the nation’s largest recruitment agencies, and before that, she served in management posts with QPS Cos., Pro Staff, and Manpower Inc.

About the Author

Jane Clark | Senior VP of Operations

Jane Clark is Senior Vice President, Operations for NationaLease. Prior to joining NationaLease, Jane served as Area Vice President for Randstad, one of the nation’s largest recruitment agencies, and before that, she served in management posts with QPS Companies, Pro Staff, and Manpower, Inc.

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