Truck fleets ramp up leasing

Truck fleet operators are increasingly turning to leasing to acquire new vehicles and shortening their asset lifestyles before replacement, according to an annual industry survey by California-based Fleet Advantage, which specializes in truck fleet business analytics, equipment financing and asset management.

This survey is a follow up to industry research conducted by Fleet Advantage in 2015. The company says that one of the latest findings is that the data shows more fleets acquiring new trucks by leasing and shortening their asset lifecycles before replacement, compared to the previous years’ data of an average of seven years.

In 2015, 22% of fleets said they were operating their trucks on a three- to five-year lifecycle, with the majority being five years (14%). This number jumped to 48% in the most recent research with 12% on a three- year lifecycle (0% in 2015), clearly demonstrating a movement to shorter lifecycle operations.

Fleet Advantages cites as further evidence, the percentage of fleets operating trucks on a six- to eight-year lifecycle fell from 44% down to 32%.

Fuel economy

As a result of these changes, fleet operators saw fuel economy gains. In 2015, 68% said they experienced a consistent increase in fuel economy with 2011-2015 model year trucks, whereas this number jumped to 84% for model years 2011-2016.

The company says key factor driving this shift comes from understanding economic versus functional obsolescence and the costs associated with fuel, which has historically represented nearly 70% of the total cost to operate a truck.

As an example of the cost savings associated with a shorter lifecycle, fleets that operate on a three-year lifecycle see a per-truck savings over ten years of $17,040, compared with those operating on a seven-year lifecycle.

Leasing on the up

In addition to shorter lifecycles, leasing activity is on the rise, the survey found. In 2015, 20% of respondents said they leased their trucks. This number more than doubled to 48% in 2016. Procurement of new trucks via leasing went from 36% in 2015 to 48% in 2016.

Fleet Advantage says with more fleets trading in their vehicles (up to 40% from 22%), it is clear the industry is opting for shorter term leasing, which provides more flexible options when managing equipment and upgrading to new trucks every three to five years.

The 2016 fleet survey also showed fewer fleets opting for full-service leasing. Last year’s survey indicated 18% of respondents utilizing full-service leases, but that number dropped down to just 4% this year.

According to the 2016 survey, 24% of operators said their fleets drive an average of 120,000 annual miles or more (68% said at least 80,000); this compares with 2015 numbers that showed 18% for 120,000 and 50% for 80,000. As a result of greater mileage, maintenance and repair costs are also a much greater concern. In 2016, 40% of participants listed maintenance and repair as the largest motivators for truck replacement next to improved fuel economy, versus just 26% in 2015.

Environmental pressures

The research also assessed industry reaction to the introduction of tougher requirements from the US Environmental Protection Agency to tackle greenhouse gas emissions, known as the GHG Phase 2 regulations. These seek to tighten down carbon emissions and boost fuel economy, as well as clarify the classification of natural gas engines and other gaseous-fueled heavy-duty engines.

The rules apply to four categories of heavy-duty vehicles and related equipment: combination tractors; trailers used in combination with those tractors; heavy-duty pickup trucks and vans; and vocational vehicles. The aim is to achieve vehicle efficiency gains in fuel economy, thereby reducing carbon, with high-level improvement targets outlined in the regulation including a 24% fuel efficiency improvement for heavy commercial vehicles.

Fleet Advantage’s survey found that despite all the industry discussion of these new requirements, some operators are still unsure of what it will mean for them. When asked if they were aware of the government’s mandate to increase fuel economy, 80% of participants said yes.

While fleets are starting to understand the financial benefits as 33% said the mandate will save a significant amount in fuel costs, however 45% said they are still unsure how it will benefit their fleet.

“Because of its proven impact on lowering fuel costs, as well as service and repair, it’s not surprising to see a large jump to short lifecycles combined with leasing for private fleet operators and for-hire carriers,” said Brian Holland, president and CFO of Fleet Advantage. “Fleets that shift to a shorter asset lifecycle quickly see these gains to their operational bottom line, and our business intelligence platforms are crucial in helping other fleet professionals see the value for their business. We believe the results of this survey validate the shift that has already taken place in the industry.”