Leasing For lmage

Vehicle image and quality----once an afterthought for most fleets-is fast becoming a primary consideration for many companies, says Jim Ellingson, lease account executive for Pacl-ease, Tacoma, Wa.

"Vehicle image is an intangible for many companies," he explains, "but the benefits of operating premium equipmert are critical to private fleets, which are eager to atffact and retain top drivers while presenting a superior image of their company and products."

In the wholesale building supply business, few companies on tbe West Coast arc presenting a stronger image than Auburn, Wa.-based PCL Building Products, a division of Huttig Sash & Door, which recently took delivery of 22 Peterbilt 378 and 385 tractors. The vehicles operate from five PGL lwations in Washington, Oregon

(l) It offers tax advantages through acceleration of deductions, investment tax credits and asset write-downs.

(2) Leasing conserves capital, eliminating cash outlays.

(3) Leasing may generate replacement of equipment to maintain productivity.

(4) Leasing aids forecasting operational costs.

It is important to understand the different types of leasing in order to maximize the advantages. There are basically two types of leases, an operating lease and a capital lease. An operating lease is typically a conventional rental contract, where there is no intent to own the equipment. The lessee pays a flat fee to use the equipment. After the lease expires, the lessee returns the equipment. If the user wishes to purchase the truck at the end of the term, the lessor will sell it at "fair market value."

A second type of lease, the capital lease, is used by com- and California.

"Our drivers are the front-line representatives to our customers, so it's critical that they represent PGL Building Products well," said Bill Seth, the company' s truckingA,varehouse manager. "Over the years, we have always preferred to operate top-of-the-line Peterbilt or Kenworth trucks. What we've learned is drat when drivers take pride in the equip ment they operate, they are much more likely to keep it clean, operat€ it efficiently and professionally represent the company to our customers. Combined with a striking paint and logo scheme, our trucks are literallv

Seth notes ttnt premium equipm"ntiot only results in happier drivers, but it's a big contributor to PGL's safety progtam. "It stands to reason," he stated, "that a com- fortable vehicle that is easy to operate will result in less driver fatigue. We believe this has contributed to our driver safety record." t6 i!r , with:

The numbers back Seth's conclusion. PGL's fleet includes 11 drivers who average more than l7 years with the company, and combined, these I I veterans have driven l4 million safe miles. "lt's clear that premium, high-image equipment makes my job much, much easier," he said.

$12 lent service * lhnt ability, last year, panies that want to own the equipment at the end of the financial contract. The capital lease is like an installment contract, but does not usually have a down payment. It can have a "balloon" payment option.

The following chart from Hyster Co. provides an overview of each type of leasing agreement and how it can help solve specific problems:

Situation

Want to maximize cash flow. May want to upgrade equipment later.

Looking to purchase, but seeking alternative financing.

Looking to purchase, but want low monthly payments

Seasonal operation creates'feast or famine" cash flow.

Looking to maintain consistent level of cash flow to cover equipment and maintenance lor long term.

Not looking lo own equipment.

Solution

Purchase Option Lease

$1 Buy-Out Lease

Balloon Lease/Determine Value Lease

Skip Payment Lease

Accelerated Payment Program Lease

Operaiing Lease (true renlal)

Whether a company has one truck or 100, managers should carefully consider whether to buy or lease the next one. An equipment dealer can provide consultation regarding the various types of financial agreements and specific equipment available, and work to find the right financial

Flexible leasing agreements

allow companies to use the latest equipment while conserving cash and obtaining tax benefits.

Benefits

Low monthly payments. Option available to purchase equipment at predesignated price, or can change equipment.

Provides altemative source of financing. Equipment is bought for $1 at end ol lease.

Provides lower monthly payments with a higher pre-ananged guaranteed purchase price at end of lease.

Payments are made during busy season when there is strong cash flow. No payments during "otf season.n plan and the best equipment to meet each company's needs. Despite a trend toward leasing material handling equipment, the decision to buy or lease depends upon each individual situation. Ultimately, the most successful companies will be the ones that use their capital most effectively.

Decreasing payments allow principal balance to be paid faster. Actual operating costs are kept stable.

Expense monthly payments as operating costs, pre-tax expense. Not showing ownership ol equipment on lhe books.