Dollars And Sense Of Full-Service Truck Leasing

Located about 30 miles southeast of San Jose (from where it moved two years ago), Mission Concrete operates a modestly sized, advanced facility in Gilroy,

Located about 30 miles southeast of San Jose (from where it moved two years ago), Mission Concrete operates a modestly sized, advanced facility in Gilroy, Calif. A producer of block, retaining wall units, and pavers, Mission Concrete found that although it did need a handful of flatbed trucks to ship product, the property didn’t really have room for the vehicles, spare parts, or a maintenance shop necessary to keep a full fleet on site. We’re not a trucking company, but we do need trucks, says company President Patrick Quinn.

For most of its 30-plus years in the business, Mission owned three flatbeds and had a small company with power units come in to pull the trailers when needed. When the vehicles started to have regular breakdowns and require a great deal of maintenance, that was when the guy who owned that business decided to get out, Quinn explains. But before he did, we had loads getting delayed or not arriving at all to customers’ stores because of this rundown equipment. We’d sometimes have to wait 10 to 14 days for a replacement vehicle, or we’d have to rent one ourselves.

That was about nine years ago, about the time that Quinn first heard about a full-service truck-leasing program run by PACCAR Leasing (PacLease) aimed at businesses that wanted to run a private fleet without the headaches associated with ownership. PacLease leases Kenworth and Peterbilt trucks through more than 270 locations across North America, including three locations Û San Jose, Salinas and San Leandro (near Oakland) Û close to Mission’s plant.

At the time, PacLease had just started a full maintenance lease program, says Quinn. They have a staff of mechanics, and if one truck breaks down, ÎBoomÌ, they have another vehicle there right away, or within 24 hours at the most. Depending on the trouble a vehicle may have, the driver can either bring it back to our yard, take it to a PacLease location, or get it towed. They’ll typically have a new vehicle waiting for us by the next day.

Because its primary customers are retailers, Mission Concrete needs its trucks to have a fairly short wheel base for deliveries. We’re also a seasonal business. So, for about three or four months out of the year, we sometimes rent an extra vehicle on top of the five trucks we currently lease, adds Quinn.

The primary benefit Mission gets from this program is that its vehicles are always up and running. We also don’t have to pay for a mechanic, parts or storage, he says. And, we don’t have to worry about emissions issues or which new compliant engines are in the trucks. If a truck goes in for service, they will just give us a new vehicle with the upgraded engine.

Mission staff fill out forms once a week to track mileage, so PacLease can keep track of when a vehicle needs to come in for servicing. Quinn remarks, I’ve noticed that with the more regular maintenance, we’re getting about 7.5 mpg with these trucks versus 4 or 5 mpg with the old company. That’s a big fuel-cost savings for us.

According to PacLease, with the full-service lease program, customers only pay for the use of the truck, not the truck itself. That can translate to savings in monthly lease payments of about 25 percent versus the cost of financing to own.

From a tax standpoint, full-service leasing allows each lease payment to be 100 percent tax deductible, and the lease works as off-balance sheet financing to improve key financial ratios. In ownership, the IRS limits depreciation on equipment. Tractors are considered a three-year property class, and trucks are five-year property class. The IRS’s modified accelerated cost-recovery system governs how much per year and over how many years the asset is depreciated.

PacLease also has a used truck-disposal network that can sell lease equipment once it has termed. The lease allows the customer to avoid the ups and downs of the used truck market at the time of replacement.