s a f e t y   &  o p e r a t i o n s

Full-Service Leasing

New programs, new customers, new uses for old trucks

PATRICIA SMITH
SENIOR EDITOR

      In general, lessors seem to have come through this recession with few long-term wounds.
      Ryder System reports a relatively flat full-service leasing market and a slight turndown in rental truck demand.
      Ryder Vice President Todd Renehan says they were able "to make the best of a bad situation" mainly by regrouping their sales force along vocational lines and by focusing much of their effort on keeping current customers happy.
      "Knowing the value of customer loyalty isn't new, but it's magnified during recession," he points out. "It's hard enough to lose a customer in good times, but it's doubly painful in a bad economic environment."
      Trucks did come back but, because so many leasing clients are small, private fleets, most leasing companies were able to weather the storm.
      "The majority of our lease customers are in the one-to-10 truck category, explains Bill Ford, president of the National Leasing system. "When you get a business failure and end up with five or 10 trucks back, it puts a cramp in your profits but it doesn't put you out of business."
      Moreover, adds Ford, there has been a significant change in the product mix. While unbundling has been talked about for a long time, leasing customers in the 1990s seemed to get serious about tearing apart the full-service menu and ordering al la carte.
      "We've seen a significant increase in the number of customers who own their trucks and look to full-service lessors for contract maintenance," he says.
      When the economy faltered, those companies might back out of service contracts, but they can't dump excess equipment in lease/rental lots.

Challenges Ahead
      Truck rental and leasing companies face two big challenges in the year ahead: the economy and the used truck market.
      Rental demand is a fairly reliable indicator of economic trends. First quarter is usually slow and, in early February, Renehan wasn't seeing any signs of an upturn.
      Ford was more optimistic, reporting a slight increase in rental fleet utilization. Nothing dramatic, he emphasized, but "a good feeling that things are starting to turn."
      Nevertheless, "We could have a good economy and still have problems with used trucks," points out Lance Bertram, vice president of marketing for Idealease.
      In the past, leasing company profits have come primarily from the sale of the truck. Over the past few years, those profits have disappeared.
      "Medium duty seems to be holding its own but heavy duty is significantly off," Bertram says. "A tractor that might have brought $25,000 at auction two years ago now brings $15,000. That $10,000 is a major attack on us."
      Leasing companies are tackling the problem in a variety of ways. Ryder now has 45 used vehicle sales centers and recently began selling used trucks at many of its maintenance facilities. The company also has a website where buyers can shop the full inventory online.
      Rather than take back more vehicles, leasing companies are offering attractive rates for customers willing to extend their contracts.
      Ford says some NationaLease companies are actually in the market for low mileage, late model used trucks for full-service leases.
      "They're buying them for about 50 cents on the dollar, compared to a new truck, and putting them out on shorter-term contracts," he explains. "Customers love it because it gets them a low rate, and we have a new piece of business."

Ready For A Comeback
      When the economy does make a comeback, leasing should do well.
      In times of economic uncertainty, "capital is king," says Renehan. Companies that need to preserve working capital usually lease.
      Rental trucks are a no-risk way to gear up from recession but they have also become key elements in full-service packages.
      Fleet managers, explains Ford, have become very sophisticated about mixing leased and rental vehicles to smooth out cyclical business demands. They have also become astute bargainers when it comes to rental trucks rates.
      Truck manufactures and finance companies may be courting customers with low interest rates and "zero down" finance and lease packages, but full service lessors still think they can compete.
      The reason? They're among the biggest truck buyers in the country, which means they get better equipment prices and cheaper financing than most small fleets.
      "When you put it all together, my price might still be better," Bertram says.

More Business In The Shops
      Maintenance has always been the cornerstone of full-service leasing. Today it's a growth market.
      "We do a heck of a lot more general maintenance and we're getting much better utilization in our shops," says Ford.
      Much of that business is coming from non-traditional leasing customers such as for-hire carriers, municipalities and construction fleets.
      Bertram, in fact, says Idealease is putting together programs aimed specifically at the special needs of for-hire and severe service operations. Both, he admits, are promising markets that full-service leasing has more or less ignored.