March 2010, Business Fleet - Feature
When Renting is a Good Idea
There are situations in which a short-term lease makes sense and others that call for buying your fleet vehicle and "running it into the ground." But what about temporary fleet needs such as seasonal or peak business times, or on a project-by-project basis? In those situations, consider commercial truck rental as an option.
"Truck rental can be very cost effective for businesses because they don't have to carry the overhead of a fleet," says Art Vallely, senior vice president - rental, Penske Truck Leasing.
When Renting Makes Sense
Considering the higher rates for rental, when would a business owner or fleet manager choose to go the rental route?
Project-based Needs: Companies may have contracts for short-term projects of a few months to a year. A rental truck can be configured to the specifications of the job; should the job and specs change a different truck can be easily exchanged. This need for flexibility makes truck rentals more suitable than investing the capital to buy or lease equipment, says Frank Thurman, vice president of Enterprise Commercial Trucks, a division of Enterprise Rent-A-Car.
Vehicle Breakdown: When fleet utilization is high, one non-functioning vehicle can mean unfinished projects or undelivered products. Rental is a solution until fleet vehicles can be repaired.
Peak Needs: Peak times can range from yearly holiday deliveries to weekly use. For example, a florist may need a few extra vehicles for Valentine's Day, or a drink supplier delivering every Friday before the weekend.
Seasonal Use: Some companies may have higher use during certain seasons. Garden supply stores such as Lowe's and Home Depot work to get inventory into their stores before the spring, while package delivery companies request more rentals toward Christmas.
An Alternative to Shipping: Some companies opt for truck rental instead of shipping products through common carriers such as UPS or FedEx.
Economic Uncertainty: Wary business owners may still not be ready to invest in equipment or sign a long-term lease, or don't have the credit to do so, says Vallely. He explains that new environmental regulations for diesel engines have pushed prices up $6,000 to $10,000 for trucks and trailers, and "the uncertainty around the cost is going to make renting a really good option."
Understanding the Rental Market
Companies offering commercial truck rentals approach the market differently and satisfy unique niches.
Penske and Ryder have the largest rental fleets and greatest model variety of vehicles, from light-duty vans to refrigerated trucks. Both have fleet management arms that offer full-service leasing and maintenance programs.
Enterprise Commercial Trucks offers light- and medium-duty truck (non-CDL) rentals and can leverage a comprehensive transportation solution through its Fleet Management division. "Enterprise will meet with a client to ensure we understand their business objective, and then we can build a fleet solution based on the products and services that best support the client," says Thurman.
Nationalease and IdeaLease are divisions of medium- and heavy-duty truck leasing companies. PacLease is a part of the financial services group of PACCAR Inc., manufacturers of Kenworth and Peterbilt medium- and heavy-duty trucks. All three companies offer full service truck leasing and management programs.
The primary focus of Hertz Equipment Rental (HERC) is industrial and construction equipment, though it offers work trucks such as pickups, dump trucks and water trucks.
U-Haul and Budget Truck Rental concentrate primarily on company moves and employee relocations.
Flexible and Fast
The basic tenet of a business program for commercial truck rental is flexibility and ease of transaction. Programs facilitate this to varying degrees with a national contract, uniform pricing, centralized billing and a single point of contact. Account specialists can coordinate rentals in various parts of the country and one-way rentals, as well as create custom rental programs. All programs have some form of roadside assistance.
When making the decision on whether to rent or lease, "It really comes down to the frequency of how often they rent," Vallely says.
In the long term, rental rates will always be higher than leasing or buying. If a business is renting three to four times a week, a lease is most likely more cost effective. However, Thurman says Enterprise Commercial Trucks has seen an increase in clients choosing rental for vehicles used less than 75 percent of the time, to avoid the capital and operating expense of trucks only used part time.
"The advantage of rental is flexibility," Vallely says. "If their business conditions change, they can turn in the equipment at any time."