Using Driver Services and Equipment Lessors Can Be a Wise Business Decision
October 1, 2003
CALGARY, Alta. - Most fleets at one time or another have found themselves with either a shortage of qualified drivers, or a shortage of equipment. But adding drivers and equipment to your regime can b...
CALGARY, Alta. – Most fleets at one time or another have found themselves with either a shortage of qualified drivers, or a shortage of equipment. But adding drivers and equipment to your regime can be a costly decision – especially if the busy times are often balanced out by slow ones.
That’s why driver services agencies and equipment lessors can be the key to filling the gaps and reducing the risk that is synonymous with expansion.
Essentially, a carrier can rely on third-party agencies to provide a complete, ready-to-roll package complete with driver, truck and trailer.
While leasing isn’t the right option for everybody, there are advantages to leasing drivers and equipment in certain situations.
With the widely reported shortage of skilled drivers, a rapidly expanding fleet can often experience difficulties in keeping cab seats occupied.
Driver services agencies such as Advantage Personnel and Global Driver Services have a wide database of drivers to draw from for short or long-term assignments.
Carriers can approach a driver services company and let them take care of the entire recruiting process – including road tests and abstract and reference checking – for full-time drivers.
The carrier is charged a one-time recruiting fee in this instance.
“They’ll give us the profile of the type of person they’re looking for and we’ll recruit them for them and simply charge a placement fee when we find the right person,” says George Iacono, vice-president of Global Driver Services.
Alternatively, if a fleet wants temporary workers to complete a short-term project, they can also rely on driver services agencies to provide the help. In this case, there is usually an ongoing fee issued per paycheck.
“It’s a feasible way for a fleet to operate if you’ve got peak and shoulder periods,” says Iacono.
Luke Sebben, branch manager of the Mississauga branch of Advantage Personnel, says the main advantage to using an agency is due diligence.
“We run the abstracts every six months on every one of our drivers,” says Sebben.
“If there are any patterns that have developed in the six month time, we can sit down with that driver or take any corrective action that’s necessary.”
Driver services companies can also provide driver training and monitoring, which reduces the H.R. costs for the fleet.
“We take that responsibility and the tediousness of that process away from the client so they can focus on what’s important to them, which is obviously improving their bottom line,” says Sebben.
On the driver side, flexibility is the main reason drivers enroll with agencies.
It offers them the chance to experience a wide range of driving assignments, and the driver can accept or reject any position he qualifies for.
Power units ranging from highway tractors to straight trucks are also available to be leased through countless dealerships and lessors.
John Stephens, president of Lease Truck Inc., says there are three main advantages to leasing power units rather than purchasing them outright:
1. Cashflow: Less capital is required to lease equipment.
2. Taxes: Depending on the individual circumstances, a fleet stands to realize substantial tax benefits in some cases.
3. Budgeting: The cost of leasing a truck remains consistent from month to month making it easier to budget.
That truck can also be turned in at the end of the lease if it’s no longer needed.
“The lessee has the right to either purchase the (unit) at the end of the contract or return it,” says Stephens, noting that flexibility is one of the main advantages of leasing equipment.
Another attractive option for fleets is full-maintenance leasing.
One company offering this service is Markham, Ont.-based Woodbine Truck Centre, which is part of the Idealease network of equipment lessors.
Idealease dealers and some other leasing companies offer full maintenance leasing, which encompasses a range of services.
“We give (customers) a truck, take care of all the maintenance and safety issues and so on and all he’s got to do is put fuel in it and run it down the road,” says Jim Hedge of Woodbine Truck Centre/Idealease.
The biggest benefit of a full maintenance lease is stability and the peace of mind that comes with knowing your monthly expenses will not fluctuate in the event of an equipment breakdown.
There are more than 400 Idealease locations in North America so if the truck breaks down, you can take it into whichever one is closest.
“If he breaks down, we give him another truck and it’s all included in the price,” says Hedge.
“He doesn’t have to budget for problems because he knows the cost right up front.”
Most highway tractor full-maintenance lease programs run four years while medium-duty city delivery applications are often six-year terms.
Trailer leasing is also an option for carriers, and is especially helpful for fleets trying to break into the market or expanding rapidly.
Kevin Brown, account manager with Kargo Leasing Ltd., a division of Tankmart International, says his company has about 250 tanker trailers leased out to various customers.
Those leases range from one day to several years.
Why opt to lease a trailer? Brown says there are a number of good reasons:
1. New contracts are won that require more equipment than the company has in its fleet.
This may require trailers that the carrier will have little use for once the contract is complete.
2. Routine maintenance or unexpected repair issues have taken several trailers temporarily out of commission and a carrier needs more trailers to continue with the job.
3. A carrier needs more trailers to cope with busy periods but it doesn’t want the risks associated with taking on new assets.
“A customer will basically be able to expense all his rentals and then send the equipment back so he doesn’t have any obligation other than for the period of time he’s actually using the equipment,” explains Brown.
“It’s a tough business right now, so buying a bunch of equipment when you’ve got a big capital outlay and you’re not sure of what the future brings, I think we help in that aspect. We insulate people quite a bit from the hazards of a very fluid market.”
Craig Sterling, vice-president of sales for Wabash Trailers in Eastern Canada, agrees leasing has several advantages in certain situations.
“If it’s an off-balance sheet lease, they expense the monthly payments rather than showing the purchase of an asset,” says Sterling. “It reduces their monthly payments so it tends to be a cashflow positive transaction.”
Another advantage is that the carrier isn’t hit with a substantial tax payment upon purchase.
“They defer their taxes on the purchase – rather than paying the tax all up front when they purchase it, they pay it on their monthly payments,” says Sterling.
The most common trailers leased by Wabash are dry freight vans, refrigerated vans and flatdecks.
Leasing equipment or using driver services may not be for everyone, but sometimes it makes good business sense.