Penske

loaders

Site Supporter
30
Just curious Jim as I was involved in the leasing business many, many years ago, but is it a full maintenance lease? The reason I ask, is back in the day when I was leasing trucks, most transport companies found it too expensive and preferred to look after their own repairs and maintenance. I certainly don’t want you to expose any proprietary info, again, just curious.
 

Jim L

Well-Known Member
30
Yes, a full maintenance lease. Monthly lease cost with a per km cost for maintenance. The best part - one phone call and someone goes out and gets the truck running. If they can't they have X hours to tow out one that we can use in its place until it is running. Works well for local trucks - not so good for over the road trucks as the truck they tow out is never acceptable to the driver (the bunk part that is). Anyone can handle a different truck to get them home at the end of the day and to use it for a couple days. We used to have many trucks with them but they have priced themselves out of contention. We also had contractual issues where they didn't get us a truck in X hours because "there are none available'.
 

lowmiler88

Site Supporter
30
our whole fleet(all trucks and some of our trailers) are Penske lease and wouldn't have it any other way, we have trucks on order to cover us for all of next year which is a good thing as of last week they have used up all of their build slots for all of 2022.
 

loaders

Site Supporter
30
That is interesting. A rather complete change in thinking from….oh my God….35 years ago! Never mind, just another old guy reminiscing about his younger days.
 

what1ship

Member
10
Historically, full maintenance leases were the choice of companies whose need for trucks was to deliver their own goods. They did not have the expertise or desire to deal with the world of trucking. They wanted a fixed cost and no concerns about breakdowns. Also some tax advantages to leasing over owning. For a trucking company with many trucks it is an expensive way to go. It all depends on your niche of operation. If you are taking over someone's small private fleet its a good way to control your variable expenses and build the mileage rate into your contract. Also set your length of term of lease to coincide with the term of your contract with the customer, that way if you don't renew you can just return the trucks.
 

loaders

Site Supporter
30
That is correct. Private fleets, who wanted no part of buying, maintaining and then selling their trucks, were the ideal customer for the full maintenance leasing companies. We had a small number of trucks on lease to actual transport companies, but the lions share of both trucks and trailers were leased to private fleets.
 

Igor Galanter

Well-Known Member
20
That is correct. Private fleets, who wanted no part of buying, maintaining and then selling their trucks, were the ideal customer for the full maintenance leasing companies. We had a small number of trucks on lease to actual transport companies, but the lions share of both trucks and trailers were leased to private fleets.
And then came Canada Cartage, eh..
 

loaders

Site Supporter
30
Well in a sense it did. Leasing companies, like Ryder, saw the opportunity to not only provide a truck, but a driver as well and lo and behold, another transport company! The lines between carriers and leasing companies were always somewhat fuzzy back then. Trip leasing, driver services, it was a bit of a Wild West show going on.
 
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lowmiler88

Site Supporter
30
When we started out we where 50/50 between owning and leasing and owning definitely had an advantage. Then we saw that advantage really started to being "almost" equal. Then we started to realize that we where not taking into account losing a vehicle for 2 days to 2 weeks and what did you do with the driver at that time. Breakdowns (major) on the road where even more of a problem everything was taking twice as long to fix on the road and driver downtime which irritated both us and the driver. Did you rent a truck for the driver or stick them in a hotel room all costs that where not always figured into ownership. Some suggested lack of expertise which we do not lack it is a completely financial decision, we decided from day 1 that we did not want our own shop, mechanics, parts etc. Seen way too many times people dreaming up make work projects for their mechanics just to keep them busy which we all know means more $$$$ spent.
 

loaders

Site Supporter
30
So by leasing equipment you are concentrating on your “core” business, which is moving freight. Not operating a repair facility, as you say with mechanics and parts, etc, etc.. You use the leasing company’s expertise in truck procurement and maintenance, which is their “core” business. The one downside I see, is you give up the depreciation of the equipment and any residual value when it comes time to dispose of the truck or trailer. But again, perhaps the road side repairs, replacement vehicle and the other perks of the lease make up for that. I don’t mean to drag this topic out but it does demonstrate the different options available and how some firms can use them successfully.
 

Jim L

Well-Known Member
30
So by leasing equipment you are concentrating on your “core” business, which is moving freight. Not operating a repair facility, as you say with mechanics and parts, etc, etc.. You use the leasing company’s expertise in truck procurement and maintenance, which is their “core” business. The one downside I see, is you give up the depreciation of the equipment and any residual value when it comes time to dispose of the truck or trailer. But again, perhaps the road side repairs, replacement vehicle and the other perks of the lease make up for that. I don’t mean to drag this topic out but it does demonstrate the different options available and how some firms can use them successfully.
I do believe that there is a good fit depending on the core part of your business. Like you said there are pro's and con's for both. The model ideally works if you mile each truck out to the max (but do not dare go over). Make sure that there is no damage on the trucks when you hand them in otherwise you will be responsible for even minor issues. Financially we believed that no more than half your trucks should be leased - if times are slow you can move only the leased trucks and spare your owned trucks so that the residual value is maintained.
As one of you mentioned, as Canada Cartage took over so many of their trucks and Penske moved into the trucking industry, we found that the rates they wanted for lease increased to the point where it was not worth it any more. In fact our last quote basically took the price of the truck and divided it by 60 months which made up the lease price - essentially saying it was worth nothing in the end. It may have changed since - we will see.
 

loaders

Site Supporter
30
With the current high demand, and prices for used trucks, one would think that a leasing company’s residual values would be pretty safe. Perhaps so much so that their monthly lease rate would be lower? From what I have heard however, all leasing companies, and large fleets are having their allocations of new trucks cut way back due to OEM shortages. That on its own, can’t be good for more economical lease rates.
 

Shakey

Site Supporter
30
When we started out we where 50/50 between owning and leasing and owning definitely had an advantage. Then we saw that advantage really started to being "almost" equal. Then we started to realize that we where not taking into account losing a vehicle for 2 days to 2 weeks and what did you do with the driver at that time. Breakdowns (major) on the road where even more of a problem everything was taking twice as long to fix on the road and driver downtime which irritated both us and the driver. Did you rent a truck for the driver or stick them in a hotel room all costs that where not always figured into ownership. Some suggested lack of expertise which we do not lack it is a completely financial decision, we decided from day 1 that we did not want our own shop, mechanics, parts etc. Seen way too many times people dreaming up make work projects for their mechanics just to keep them busy which we all know means more $$$$ spent.
in most acquisitions the first thing they do to improve profitability is shut down their shop.
 

Jim L

Well-Known Member
30
The other issue we found with the Penske model was that they could not be entirely flexible with maintenance in the fact that appointments needed to be made long in advance. It was really tough trying to plan a long haul guy to be back on specific day for maintenance. So then you were stuck making the driver wait a number of days so that you can make the appointment. Then Penske would call to say that they could not find a part and spend even more time off the road. Utilizing a sub unit is not really feasible because of ELD, licensing etc. At least with our shop we are able to get it in at any time - identify the severity of the part and if need be, steal a part from a different truck to keep trucks moving. We also stock many more parts than Penske does.
 

loaders

Site Supporter
30
The shop at a full maintenance leasing facility is little different from a dealers repair centre. You are competing for space and mechanics time with every other lease customer they have. Scheduled PM is one thing, but all the other repairs that need immediate attention are usually subject to a wait. Perhaps a model where line haul, highway units are owned and serviced in house, but city P&D/local units are leased?
 

lowmiler88

Site Supporter
30
We have no issues with service they give us 7 spots in Oshawa on every weekend and 3 in Belleville and more than covers the service requirements. We decide together which trucks are in the most need and in the area and they get done when we need them. We have some trailers with them and they just send out their mobile unit to take care of them. Again it works for us, we have a fleet manager and an administrative clerk that spends about 4 hours a week with data entry and that's it.
 
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