Leasing looks an option whose time has come

By: Rob McKay


Lessors see attitude changes as smaller fleets find flexibility

Leasing looks an option whose time has come
Truck leasing is seen as gaining wider acceptance

 

Truck leasing is looking better than ever, with a huge number of fleets having sailed through the pandemic and looking to exploit opportunities.

Sector players ATN spoke to see a number of reasons likely coalescing, but more widespread acceptance of the flexibility leasing allows is a major one.

Amongst contributing themes raised were:  the end of hesitancy around new truck emissions rules; wear and tear finally forcing owners’ hands; and the need to add to fleets as new contracts arose.

PacLease

Paccar as a whole has never been busier, according to PacLease Australia general manager Andrew Molnar. And that is flowing into its leasing and finance operations.

"The more trucks we’re building and selling, the more we’re financing," is Molnar’s equation.

He sees a greater uptake in leasing in particular.

"There was a fair bit of uncertainty with customers and their contracts – if they had a truck to fulfil a contract, they were unsure about what was going to happen at the end of that," he notes.

"So, they might have got a 12-month extension or just an ongoing agreement, where they were unsure whether to reinvest in new gear or continue running what they had."

Andrew-Molnar-2019-1.0.jpg

Andrew Molnar

 

The emissions uncertainty was the cause of some long-term caution, given the next level of engines that was expected through most of the last decade ended up failing to materialise.

"I think people were holding off, thinking: ‘I’ll wait for a pre-buy that we’ve seen in the past . . . we’ll reinvest before we see this change to Euro 6, or Euro 6-equivalent’."

The federal government’s investment allowance, given impetus by instant asset write-off, is a definite contributor but, for Molnar, that doesn’t explain the leasing demand he sees running 20 per cent higher than normal and putting business targets in danger of being obsolete.

"I think there are a whole lot of different little factors that are seeing everything increase for us," he says.

 


Read how banks are seeing enormous growth in asset finance demand, here


One of those is a discernible change in views on leasing.

"Definitely," Molnar says.

"It’s becoming much more acceptable here."

He puts the change down to contractors to larger firms gaining a greater appreciation for the certainty on expenditure, including for maintenance.

Penske Truck Leasing

Penske Truck Leasing (PTL) also finds itself in a good place, according to general manager Adrian Beach.

That is especially so for the "absolutely booming" daily rental offering that PTL led its entrance into the domestic market with seven years ago. And this has affected its business practices.

"B-double prime movers are near 100 per cent utilisation – unseasonably high," Beach says of the present situation.

That rate is usually reserved for the height of the busy season that crescendos up to Christmas, then slumps to about 60 per cent in January, bar a couple of up-ticks around Australia Day and the like.

With a traditionally slow calendar in the second and third quarters, the strategy had been to sell off any returned vehicles of more than five-years-old and go with a smaller rental fleet, while ordering new ones to be available in September or October.

"This year, nothing came back. We dropped back to the 80s or 90s with the biggest fleet we’ve ever had," Beach says of the percentages.

All PTL’s equipment sales have been suspended in response and it has asked suppliers to pull all its orders forward.

Penske Truck Leasing general manager Adrian Beach.jpg

Adrian Beach

 

This month, PTL is taking delivery of five rental vehicles: two prime movers and three rigids.

"We’re not usually taking new equipment in June but we’re grabbing everything that we can," he says.

"We’re looking at MAN and Western Star aged inventory – maybe they have something sitting around that could work for the rental fleet. But they don’t have a whole lot of inventory either."

Beach says customers tell PTL they already have new trucks on order that can’t arrive for six to 12 months, so are renting in the meantime.

"So, that drives our utilisation up and makes it more difficult for us to buy new trucks too," he adds.

"Production slots are up and inventory is depleting."

Much is being said of supply chain issues affecting truck construction, especially related to the supply of crucial semiconductors that are now essential and everywhere on modern vehicles.

Beach is aware of the issue but says it has only cropped up last month in conversations he has had with suppliers, and not at all with regards to European manufacturers.

He counts PTL fortunate to have ordered 50 MANs last October and expects those to arrive on time.

Those ordered subsequently are likely to arrive in the second quarter of next year.

Beach also sees an attitudinal change to leasing.

Whereas, two to three years ago, PTL had about a dozen full-service lease trucks, it sits at about 50 now.

"We have more quotes on the table than we ever have and we’ve signed more new lease customers since October last year than we have in the previous five years," he explains.

Interestingly, he discerns a certain amount of experimentation from new customers interested in transitioning from US to European makes but wanting a better grip on running costs and resale values.

 

 

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