In our continuing series of member blogs, Wade Bryant, Leasing Manager for Century Leasing LLC, a NationaLease Member, in Jeffersonville, Indiana, discusses the downturn in the commercial truck rental business.
At the NationaLease Annual Meeting in Chicago this past September, the members discussed a wide variety of issues that are impacting their businesses, both helping and hindering growth. One of the topics that did come up as negatively affecting the business was the drop in commercial truck rentals. We’ve certainly seen it in our company which services the Kentucky/Indiana region, with the slowdown starting back in July.
There are a number of reasons for the slowdown. First, some of our customers are experiencing a drop in freight. For others, the driver shortage means even if they need the truck, there’s no driver to fulfill the job. And then there’s the reality that today’s trucks are a lot more reliable. They’re built better and break down less. If a fleet’s vehicle is out on the road instead of in the shop, there’s little need for a rental. That’s created a highly competitive push with providers having many rental trucks available on their lots.
Since rentals are a part of our business, we have to have them available. But whether that truck gets rented or not, we still have to pay for it, so a slowdown definitely has an effect on our overall revenues. That’s why for fleets that make rentals a part of their business, it’s essential that they try to right size their fleets for all purposes.
There are a few short-term positives. The holiday season is upon us and that should see an increase in the need for short-term truck rentals to fulfill holiday inventory. Some customers are exploring new routes to grow their businesses. To make that exploration feasible, customers cannot afford the expense of long-term vehicle leases or purchases. Whether it’s a day, a week, a month, or a couple of months, renting a truck enables a company to affordably test the viability of a new region or driver without the large financial commitment. .
It’s never easy to predict the future when it comes to business, especially during an election. But it does seem as though 2017 might be a bit of a rough year for those of us in the transportation industry. We all know how bad the residual truck market is…and that doesn’t look as though it’s going to improve any time soon. But I’m an optimistic guy, so I look for a silver lining in every situation. If companies think they can conserve their cash by keeping their older model vehicles rather than replacing them with newer, more expensive models, those older trucks may end up experiencing more downtime. And that may lead to a need for more rentals, at least until the economy stabilizes and new purchases take off. We will all have to wait and see what the future holds.