With service vehicles being one of the largest capital investments a PRO can make, the decision to lease or buy is an important one. Not only does this decision affect the way vehicles are managed — expensed item or depreciated asset — it also impacts cash flow, maintenance schedules and sometimes, even what types of vehicles are available.
Two PROs with very different situations talk about why they do what they do when it comes to building their service fleets, and what might change their minds.
John St. George’s company is located in a northeastern suburb of Richmond. The company buys all its vehicles — large pumpers as well as smaller service trucks. He’s not a big fan of vehicle leasing, and can’t really imagine anything that would make him change his mind.
St. George fields 1,000 portable restrooms, with 85 percent of the units serving construction sites. “My issue with leasing is that the equipment gets beat up so bad. We put a lot of miles on the trucks.”
Despite the appeal of a “new every two” or similar lease plan, this Virginian isn’t tempted. “Is there an advantage to getting a new cab and chassis? Sure, but I’d rather own the asset as opposed to changing it out.”
For St. George, it’s a simple matter of fiscal sense. “Our company tries to frontload most of its financing. We don’t (enter into financing deals that) go past 36 months. And in that 36 months, I could own that truck” without taking the huge backend hit for dings and damages that constitute normal wear-and-tear for his fleet, he says.
“And then there’s the downtime when you have to turn in the leases and get the equipment re-fitted,” he adds. The thought of being without one of his trucks for any stretch of time doesn’t sit well with St. George. “I’m not as knowledgeable on that as some guys, but I just don’t think it would work for us.”
Norton Williams Jr. pumps septic tanks and grease traps along with providing portable restroom service in the tourist paradise of the U.S. Virgin Islands. Currently fielding 42 single units, Williams says about half of those are out on monthly contracts at construction sites, while the rest are reserved for events and professional functions.
He currently owns his vehicles, but has considered leasing in the past, and would do so again. “I need the cash I would save and I need the vehicle, so I would consider leasing,” he says. But in addition to all the usual factors a PRO must weigh in a lease-or-buy decision, Williams has another serious obstacle to contend with.
“I’ve only met one company that will consider leasing to a firm outside the continental U.S.” He’s talking with that company to see what can be worked out. If some accommodation can be made for his location, Williams will be seeking favorable monthly payment terms and interest rates. If all the cards stack up in his favor, there may be a leased vehicle in his future.
