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Taking the hire road to rental
Page 72
Page 73
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As if a diminishing client base wasn't enough for used CV dealers to worry about, fleet operators and owner-drivers are starting to turn to the rental market.
It's difficult to pull the wool over the eyes of used truck or trailer dealers.They know when buying trends are changing and how it hits them in the pocket.They might not always let on, but they know.
Rod Pybus, MD of trailer dealer SDC Northern, was the among the first to spot the trend towards rental. He realised some operators would sooner rent trailers for higher monthly rates simply so they can hand them back when time get hard, rather than finance trailers—even at cheaper rates — for fear of incurring long-term debts they can't afford to service.
He believed this was down to a lack of confidence. Not only in the security of their work, but in the rate for the job and in road haulage in general. This wary approach is understandable, but with profit margins already cut to the bone it seems surprising that a growing number of operators are prepared to increase their running costs by renting rather than buying on the used market.
Scottish owner driver Barry Neill puts the issue in perspective: "Owing money without the ability to repay has more consequences than you think. Sure, buying from the second hand market is cheaper than the new,and there are decent deals to be found, but road haulage is more precarious than it has ever been.
"If you pack up owing two years on a truck it can blacklist you, credit wise, and it'll stop you starting up again if the situation arose. Plus it stops you in other areas, like mortgage, credit cards or even getting an overdraft."
Accepting a lower profit in exchange for the freedom of rental means operators like Neill can walk away without increasing their debt if they run into a crisis. He runs three trucks: an artic. an 1 8-tonner and a 7.5-tonner, all on medium-term rental deals.
-This reflects the nature of the work [general haulage and spot work] that I do," he says. "It could all finish tomorrow."
Other side of the fence
A number of franchised and independent truck dealers are also reporting that some fleet operators and owner-drivers are taking the rental route. And on the other side of the fence, TLS Vehicle Rental is hardly going to complain about this trend.
The company has moved out of the topweight market to specialise in 7.5 and 18-tonne dry-freight rigids, but it's still benefiting from the move to rental. Marketing director Sean Welham says the pay-as-you-go (PAYG) trend, usually more associated with mobile phones, movies on Sky TV and the M6Toll Road, is spreading to trucks.
"We are trying to position daily rental less as a solution to short-term problems and more as an alternative to established vehicle acquisition methods," he adds."The general consumer move towards PAYG thinking is helping us to do this.
He explains: -We can say to someone with a co nmercial vehicle need:`the reasons you have a PAYG phone in your pocket arc very similar to the ones that mean you should consider van rental. You want a reliable solution to your communication or transport need but you don't want lobe locked into a long-term commitment"."
The cash difference between renting and buying is smaller than people think, says Welham, hut there is a small premium to pay for onvenicnce and flexibility, Mark Hyland at Ford dealership Bramall Quieks hasn't seen this trend in the van sector. He does receive enquiries about short-term contract hire hut doesn't offer this service.
David Morgan, used sales manager at independent Scania dealership Kel truck, has not encountered a move from purchasing to rental, hut he reports that deals coming off longterm contract hire have boosted demand for short-term rental deals. He has seen three,four and five-year deals extended for a further six or 12 months to make sure vehicles complete their contracts.
Need to remain flexible
The main issue here is that operators working on short-term or seasonal contracts need to remain flexible: they can't afford to have idle vehicles draining their resources Predicting how the pendulum might swing involves tangible issues like fuel duty, overseas competition,consistent rates and irregular lengths of contracts. And these factors indicate that rental might just swing it.
Welham says: 'There is an old saying in the rental industry— when you need a van it's yours;when you don't it's ours.This is just another way of expressing the PAY G philosophy— and its one that we believe makes a great deal of sense for many businesses in our industry."