The hidden costs of truck ownership

Oct. 1, 2011
Fleets that are considering leasing already know about the most obvious advantages to full-service leases. For most, knowing their fixed monthly costs is paramount and a huge selling point when it comes to leasing. For others, it's not having to repair trucks, staying abreast of the latest technology, or keeping a staff of technicians to maintain vehicles. Still others enjoy the capital-free aspects

Fleets that are considering leasing already know about the most obvious advantages to full-service leases. For most, knowing their fixed monthly costs is paramount and a huge selling point when it comes to leasing. For others, it's not having to repair trucks, staying abreast of the latest technology, or keeping a staff of technicians to maintain vehicles. Still others enjoy the capital-free aspects of leasing.

For many fleet owners, especially those on the fence about leasing, a look at the hidden costs of ownership may sway them. Some of these costs are concrete and easy to determine. Others are more difficult to calculate.

One of the biggest advantages of leasing, according to Tom James, president & CEO of the Truck Renting and Leasing Assn. (http://www.trala.org/), is having someone with whom to share risk. “Leasing gives fleets a partner, someone they can rely on,” he says. One of the biggest costs of ownership is the uncertainty: Will trucks be available? Will they be roadworthy? Will they have the latest technology? Are they in compliance? “With leasing, you have a partner to help you with these issues,” says James.

One example of a simple cost-saving advantage of full-service leasing is truck washing, which helps driver retention, another hidden advantage. It also takes the work out of complying with environmental regulations that govern wastewater coming off dirty trucks. “A lot of fleets don't think about that,” James notes. The same thing is true about keeping up with changing environmental regulations on disposal of used oil, coolant or parts that contain hazardous materials.

Another hidden cost to owning is taking on new technologies that may not be ready for prime time. In recent years, fleets have had to deal with new engine designs, mainly stemming from new emissions standards and technology, and engineers are still trying to understand subtle (and some not so subtle) changes in fuel and oil consumption over time. For instance, fleets continue to test different oils hoping to run engines longer and cooler. With leasing, fleets don't have to worry about trying out new tweaks because the leasing company takes care of it.

Owners must also consider sales of their used trucks. Before the current financial situation, savvy owners could estimate pretty closely how much a truck would be worth based on year and engine time. Now, with an unclear economic outlook, figuring out how much a fleet can expect to get for a used truck is not as clear.

Keeping trucks on the financial books can make a fleet look financially worse in the eyes of lenders. By exploiting off-the-balance-sheet accounting of leasing, fleets look better to lenders for lines of credit and lower borrowing rates.

“Most customers of leasing are small businesses,” adds James. For them, the hidden costs of ownership can add up.

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