June 21, 2012
Increased vehicle technology and costs can work to a leasing company’s advantage.
By Denise L. Rondini, Executive Editor
The leasing industry began the year ordering trucks to replace its aging fleets, but since has leveled off according to Dean Vicha, president of NationaLease.
“Overall I would say our members are ‘holding serve.’ Nobody seems to be really growing their fleet or growing their business. It is kind of a cautious approach out in the market right now,” he says. “There does not seem to be a lot of adding of equipment, but [customers] will replace something if they have to. Nobody is really growing, by nobody is shrinking either.”
Unfortunately the rental market which had been going “gangbusters until a couple of months ago, has seemed to slow down a bit,” he adds.
Some of the growth seen by NationaLease members has come from markets they historically have not been strong in including big boom cranes and [other construction equipment]. “This is an emerging market for us and we are spending more time with it now.”
The biggest challenge faced by the leasing industry is the increased cost of equipment. “A lot of folks who may not have replaced a truck for the last five or six years are seeing vehicles that now carry another $30,000 or $40,000 price tag,” Vicha says. “So there is some sticker shock when those replacement numbers are presented.”
To overcome this, Vicha says leasing companies “have to sell who you are and what the value is of what we provide. And for us that is a locally owned business that provides a high level of service in the marketplace.”
He adds, “It is getting creative and being flexible with our customers so we can help them with whatever unique needs they have. We don’t use a cookie cutter or a one-size-fits-all approach. We will customize a lot for our customers and at the end of that day, we have to be more of a partner in helping them separate themselves from their competition and be the guys who keep their trucks on the road.”
However, the increased technology on today’s trucks also can be a benefit to leasing companies.
“The increased technology is really making it harder for somebody who isn’t in the truck transportation business as their core business to keep [transportation] in house,” Vicha says. “They don’t want to use their credit lines. They don’t want to finance the purchase.”
Vicha is seeing signs of companies who historically had their own shops and their own technicians looking at out sourcing.
“The technology and the investment in keeping up with the truck and training technicians is a lot tougher today and they can’t keep up with it if it is not their core business. As a result, we are seeing a lot of folks who historically were in ownership looking to us to outsource.”
He says CSA requirements also have had an impact on leasing. “It is another reason folks are switching over to contract maintenance and full-service leasing. This gives them a professional program to help keep their scores up.”
As for the balance of the year, Vicha says NationaLease members are cautiously optimistic. “A lot of people have an eye on the elections and on what is going on in Europe. I don’t know if anybody is really forecasting a lot of great things, but the days of the recession and the days of downsizing are certainly over.
“We are slowly growing so that is a move in the right direction versus 2009 and 2010, which were tough years for everybody.”
Looking to 2013, Vicha sees more of the same. “People have started ordering little bit and started growing their fleets but since the rental market has softened a bit, I think [customers] will stay cautious. If they can’t justify the return on investment, I don’t think there is going to a lot of ‘build it and they will come’ going on.”
One issue that concerned many in the leasing community was the proposed changes by the Financial Accounting Standards Board about the way leases of all types are accounted for. The implementation date for those changes has been pushed back but even without that push back, Vicha says he did not think the changes would spell doom and gloom for the leasing industry.
“A lot of people look at it purely from a financial background and when you look at it through those glasses, you get worried. However, there are so many other advantages that leasing provides and reasons people outsource that I think there still will be a lot of reasons for someone to[lease],” he says.
Leasing gives companies the ability to focus on their core competency and not have to keep up with all the changes in truck technology.
To be successful going forward Vicha says leasing companies “need to keep innovating and be on the forefront of finding new, bigger, faster, quicker, more cost-effective ways of supporting their customers and become as much of a single-source provider in the transportation arena as possible — especially for somebody that is not in the transportation industry.”
This can include offering things like dedicated logistics and warehousing. “Doing that allows you to become that single-source provider and then truck rental and leasing is just part of the menu of services we offer.”