The constant ebb and flow of the trucking industry can make it difficult for fleets to accurately predict how many loads they can expect to move next quarter, much less next year. This can make leasing equipment a gamble. As more and more carriers close up shop, it has become a gamble that some companies may not want to take.
When a company commits to a traditional truck-leasing agreement, it is required to predict how many miles that truck will move over the next several years. This rough estimate determines the company’s payment. The trouble comes in when real mileage deviates from the estimate.
If a company overestimates mileage, it will ultimately end up overpaying for the depreciation of the equipment throughout the life of the lease. If it underestimates mileage, the company is required to pay an over-mileage penalty at the end of the lease for surpassing its allowance.
To improve on this process, Daimler Truck Financial is preparing to launch Dynamic Lease, the industry’s first pay-as-you-drive leasing option. The new lease product, powered by Detroit Connect telematics, sets a lower base payment and uses actual monthly mileage data to determine a variable portion of each monthly payment. This real-time pricing gives carriers the power to better manage their cash flow, and it could result in significant savings for their bottom lines.
“We are excited that we were able to cross-utilize products within the Daimler family to create a product that would better service our customers,” Sanjiv Khurana, Daimler Trucks North America general manager of digital vehicle solutions, said. “This game-changing business solution demonstrates our innovation leadership commitment.”
Carriers get paid based on how their trucks are utilized. If a truck is moving, it is generating revenue. If it isn’t moving, it isn’t generating revenue. With Dynamic Lease, companies can keep their payments lower when they’re not using their trucks. When they are using their trucks more, and they have the revenue to make higher payments, their monthly variable portions of the payments increase.
Just like with a traditional lease, carriers will work with Daimler Truck Financial to determine a baseline mileage and payment structure at the onset of the Dynamic Lease. Unlike a traditional lease, however, unused miles roll over at the end of each month for future use. Additional monthly mileage overages will then be charged by the mile.
“Dynamic Lease is the future of truck financing. Thanks to the telematics embedded in the vehicles, we can offer a tailor-made pay-as-you-drive leasing solution,” head of Daimler Truck Financial Tobias Waldeck said. “Dynamic Lease gives our customers the opportunity to personalize their financing and thus significantly increase their flexibility in planning and managing the uncertainties of running a business.”
Daimler Truck Financial makes decisions with the changing technological landscape and the transformation of the trucking industry in mind, according to Steve Glass, Daimler Truck Financial marketing director. This innovative new leasing model is evidence of that drive.
Dynamic Lease will be made available to a select group of fleet customers in the U.S. market exclusively for the Freightliner Cascadia starting at the end of the first quarter of 2020. The full product rollout will be gradual, allowing the company to monitor the product as volume is steadily increased, according to Glass.
Dynamic Lease is expected to be fully available toward the end of the year.