The classic “lease versus buy” dilemma isn’t just about houses and cars; it’s also about trucking equipment. Carriers choose to rent trailers for several reasons, including flexibility, cost savings, and keeping their fleets young. Market volatility has also proven to be a strong motivator.
The current coronavirus pandemic has had something of a roller-coaster effect on the market – sending volumes surging in some sectors and plummeting in others. Carriers experienced weeks of tight capacity, followed by months of rock-bottom rates. Now, lockdowns are lifting and volumes are creeping back up.
Recent market volatility – and the threat of a second coronavirus wave – could prompt carriers to choose to lease over buying as they build their fleets back up to meet rebounding demand.
“As the economy creeps back, shipper demand tends to ramp up much quicker than carrier capacity. With leasing, carriers can benefit from immediate availability from a leasing company that specializes in making sure the right assets are in the right place at the right time,” Milestone Vice President of Operations Sean Ellison said. “Leasing lets carriers avoid the backlog that comes with buying.”
When it comes to meeting fast-growing demand, trailer leasing works best when combined with a reliable trailer tracking system. Tracking services – like those offered by SkyBitz – help carriers achieve maximum utilization in volatile markets, allowing them to cut down on waste and quickly determine where they have the capacity, according to Milestone Executive Vice President Chuck Cannata.
“There is a lot of conservative management of capital out there right now, and understandably so. Leasing trailers allows companies to conserve capital while at the same time grow their fleet to accommodate new lanes or increases in capacity demand,” Cannata said. “The flexibility that leasing allows is much more dynamic than ownership.”
Leasing trailers can strengthen a carrier’s bottom line because it enables them to take advantage of revenue-generating opportunities, then redeploy or return the equipment when the opportunity ends, Cannata added.
The ability to shift into news lanes and expand services is valuable, especially in the wake of a disruptive event like a pandemic. Over the past few months, Milestone has helped customers temporarily pivot from reefer to dry van with short-term leases. They have also leased temporary storage trailers to companies that generally rent new trailers, according to Ellison.
Leasing does not necessarily have to replace buying when it comes to building a more efficient fleet. The two approaches can complement each other.
“One of the things that buyers need to consider is striking the right balance between buying and leasing. They should understand factors like the contract length and trailer specs. Having varied equipment can be helpful to generate higher utilization should the business need to pivot,” Milestone Executive Vice President of Mobile Warehousing and Storage Sarah Johnson said. “We offer a consultative approach, and we consider all these things when making recommendations.”
On average, companies save upward of 20% once they balance their fleets for maximum efficiency, according to Johnson.