New value in leasing
With PACCAR’s PacLease division now open for business and Penske Truck Leasing active since late 2014, there is more movement than ever in Australia’s truck-leasing scene. Is the commercial road transport industry ready for a new finance model?
To many in Australian trucking, being involved in the industry is more than just a job – it’s a calling. It’s the experience of being part of a close-knit community of likeminded people who support and respect each other in a world that is becoming increasingly corporate and anonymous. But, even in an industry as passionate as trucking, there is no avoiding the reality of running a business and the inevitable issues that come with it – most notably cash flow.
“Running a modern road transport fleet is a huge financial commitment that can quickly tie up more capital than expected,” says Olen Hunter, head of PACCAR Australia’s newly founded leasing arm, PacLease. “You have on-going expenses like fuel, insurance and maintenance, but you don’t get paid with the same frequency. The resulting gap is one of the main issues transport business face here in Australia and around the world and the reason why they often get stuck in neutral.”
With the Australian economy caught up in a transition phase from mining-led growth to a more broad-based model, transport businesses are especially prone to suffering from constrained cash flow, says Olen, a leasing industry veteran who previously led PacLease Sales in North America. “Trucking is closely aligned with the economy at large, which is why the market has become so volatile as of late. Even those with a well-balanced business model now have to make sure they don’t fall into the cash flow trap.”
To counteract that development, Olen says leasing and renting equipment is now becoming a viable alternative to owning it outright, as it can avoid locking away capital and thereby restricting cash flow. Rather than applying working capital to purchasing a vehicle – or tying it up in long-term loans that reduce borrowing reserves – he says lease customers can put their money to work in programs directly related to their businesses’ growth and profitability; adding that the trend is spreading rapidly across the industry. “It’s a different way of thinking about business and people slowly realise that not owning equipment doesn’t mean a disadvantage for them.”
Agrees Adrian Beach, General Manager at Penske Truck Leasing Australia. “We can see a lot of movement in the marketplace at the moment as we are trying to breathe new life into the idea of leasing and renting. It’s an exciting time for those who are open to challenging the traditional concept of truck ownership.”
The full story has appeared in the August edition of Prime Mover. To get your copy, click here.