The Fleet Business Authority
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PHOTO BY JIM PARK PHOTO BY DEBORAH LOCKRIDGE Good used trucks cost substantially less than new and can perform well. But research their reputations before buying. New trucks usually are more reliable and cost less to maintain than used, though there have been glaring exceptions with emissions equipment. field, Mo. "They're good for driver retention because from a driver's point of view it's a new truck. Fleets like them, too, from a safety viewpoint – it's got new brakes, tires and electrical systems." Buy or lease? Cash is king when acquiring any vehicle, but most customers have to finance it somehow. That leads to the question, buy or lease? Large motor carriers have the expertise to manage 44 HDT • JANUARY 2014 all aspects of vehicle ownership, from getting volume deals and maintenance and warranty administration to fuel purchasing and reselling. So they usually buy. But some mix in some equipment leases as well, says Joe Gallick, vice president of dedicated services at NationaLease. For smaller carriers and owneroperators, buying is the usual route. It makes sense if interest rates are low (as they now are), if dealers or truck builders offer good trade-in allowances, and if there's enough equity in the trucks to be traded to take care of the down payment. New-truck dealers are affiliated with "captive" financing and leasing companies as well as working with banks for loans, and most independent dealers also have access to financing sources. For consumer-goods manufacturers and merchants for whom trucks are tools to get their products to market – private fleets – leasing can make sense. Saving the "downstroke" on a new truck frees capital that can be better spent on production machinery, store remodeling or a thousand other uses that are closer to a company's core business. The same is true with for-hire carriers that could use such capital to build a new shop, or to expand the fleet further than would otherwise be possible through buying. "One of the things a leasing company offers is financing so a company's capital lines are kept open," Gallick says. "It's reasonable credit at no down payment – 100% financing – instead of going to a bank or lender to buy trucks, where you'd have to put money down." That's possible because the leasing company has more outlets for that vehicle if the original operator defaults, he explains. The leaser also has a good grasp of the vehicle's residual value. "There are a lot of gray areas in between, and a lot of structures where, for instance, the truck dealer might be aggressive in residual values," Galick says. "The resale market is fluid. It's predictable to a degree, but all the things you can't predict, like the economy and government mandates, that might have an impact on demand and value, are factors." Like big fleets, leasing companies also can cope if the used-truck market is weak when the planned ownership or leasing cycle is up. They can www.truckinginfo.com