10 Trailer Topics
Ask these key questions to determine the true cost of your trailer lease: Krell
Trailcon Leasing is moving, and this is clearly welcome news to Mike Krell, the company’s national sales and marketing manager. Many of the spaces in the Mississauga, Ontario headquarters have already been repurposed since the building was first opened in the 1990s, and the ever-growing fleet of trailers is now stored in several different yards. “Watch your head,” he adds, passing under a bulkhead on the way to a maintenance area-turned-office.
The cramped quarters will soon be a thing of the past. Later this year, the company is scheduled to move into a larger facility in nearby Brampton, local storage yards will be consolidated, and maintenance teams will enjoy the cover of a shed’s roof when working on as many as 50 trailers at a time.
Facility tours like these are obviously important when gauging a leasing company’s capabilities. (You tour the sites which supply and service your equipment, don’t you?) But they also offer a chance to have the discussions that will influence an agreement’s terms.
Private Motor Carrier magazine asked Krell, a 14-year industry veteran, to identify some of the key questions which dictate a trailer lease’s true costs.
- Exactly where will the maintenance be performed?
Full-service leases are clearly important to private fleets which lack their own maintenance teams, but the physical location of a leasing company’s service facilities can influence everything from downtime to rates.
Multiple locations certainly offer greater flexibility around where the work can be completed. Trailcon, for example, has Ontario locations in Cornwall and Mississauga, Alberta sites in Edmonton and Calgary, and a satellite location in Langley, B.C. It is also a charter member of NationaLease’s trailer division, offering maintenance coverage throughout North America. “If the fleet’s in Tuktoyaktuk,” he asks, “is the service there?”
But the maintenance costs can vary from one region to the next. “If you have a fleet that runs east to west, and you can schedule maintenance in the cheaper geographical area, you can see better pricing,” Krell explains. Shops in Alberta, for example, need to pay technicians higher wages than those in Ontario because of added competition for skilled tradespeople in the surrounding Oil Patch. Costs like these will be passed on to the fleet.
The simple act of moving a trailer to a shop can introduce costs of its own. “If the service intervals are set every 90 days or 120 days, that’s three times a year you need to shunt the unit. If the cost is $100 or $150 every time you get in that truck, just to bring it to the [service] location and bring it back, there’s a lot of cost in there,” he says.
Scheduling work in a fleet’s own yard can lead to savings.
- How will third-party repairs be handled?
On-road breakdowns present a different challenge. Full-service maintenance agreements will cover the cost of a third-party repair, but leasing companies handle the related issues in different ways.
There is a price to be paid for after-hour service calls, dispatching the service trucks, paying the vendors and dealing with the paperwork. While some companies offer these services at a fixed rate, others base costs on a percentage of the invoice.
- How are the records produced?
Reports and invoices are only as accurate as the data used to generate them, but technology is helping to ensure accurate information is available. Scanners, bar codes and QR codes can all be used to limit the errors traced to keystrokes or poor handwriting. Trailcon, for example, equips its maintenance teams with ruggedized tablet computers which scan the bar codes on everything from trailers to consumed parts. They can also be used to take photos of a trailer’s condition.
“I can offer reports on damages, normal wear and tear, and all the breakdowns,” Krell adds, referring to the information that emerges from the collected data. “The maintenance reports will help a fleet with budgeting. If you see a lot of damage happening, or signs of misuse, you can say “Maybe we need to take another look at this specification.”
Consider the reports about a reefer as just one example. “If we see that it is being over-used or under-used, we can bring that to light,” he says. “If it’s over-used and it’s killing itself, maybe the breakdowns will be more frequent. Maybe it is time to change that out.”
- How are Preventive Maintenance schedules set?
Effective schedules for Preventive Maintenance campaigns will reflect how a trailer is used, the annual mileage it covers, and even the personnel who are moving the trailers. Fleets which rely on owner-operators, for example, might need to watch for signs of broker brakes, caused when a driver only applies the trailer brakes to extend the life of the friction material on a tractor. “The more you use it,” Krell adds, “the more it needs to be serviced.”
- Can you service other equipment?
Some fleets include a mix of leased and owned trailers, depending on when the equipment was acquired. But a leasing company’s maintenance teams might be able to extend programs to cover every piece of equipment. Trailcon, for example, maintains more than 10,000 fleet-owned trailers on top of the 6,500-plus trailers that it leases.
- What kind of wear and tear will you accept?
Most trailers will be given a new lease on life when an agreement concludes. The brand new van trailer leased to a fleet for five to 10 years might then be moved into a rental fleet to address short-term needs, and then shifted into a storage role before being retired as a container in a farmer’s field. (Yes, trailers are literally put out to pasture.) It’s why the condition of a returned trailer plays such a role in rates and penalties.
“We understand that [a trailer] is utilized to move freight, so it will have bumps and bruises. But with any descriptive words like ‘cut’ and ‘broken’, those are damaged trailers, and the leasing company is not able to do a secondary lease,” he says. Issues like these will need to be fixed before the equipment is passed along to another customer.
- How can we improve the trailer spec’s?
Private fleets tend to have a clear understanding of exactly what the trailer will haul and the routes to be taken. This information can be used to refine trailer specifications to deliver added benefits.
A few upfront upgrades can reduce the cost paid for everything from fuel to maintenance. Trailer skirts, for example, have become a popular choice to improve aerodynamics and realize better fuel economy. Trailcon is also experimenting with tire inflation systems for trailers which run through hot and cold regions during the same trips, maintaining pressures at 100 psi and extending tire life in the process. Automatic greasing systems, meanwhile, can help to extend the life of several trailer components, reducing mileage rates.
Local expertise will make a difference when choosing the right options, Krell adds. Those who work in a northern locale like Edmonton, for example, will understand the demand for added insulation. “It’s why we hire people locally and regionally.”
- Do the service hours match the fleet’s hours?
Maintenance schedules are not only planned by the day. They can also be planned by the hour. A fleet will likely want to time the work during those moments when a trailer is not needed to move freight.
“What happens if the leasing company does not perform in the matter that they said they would. Are there replacement units available?” Krell adds. Trailcon will offer a replacement trailer if a scheduled repair is not completed within 24 hours. “That’s why we’re very diligent on performing services on 90- and 120-day services. Preventive Maintenance helps the longevity of the unit, which reduces the downtime.”
- What costs will change over the life of the agreement?
Consumer Price Index adjustments can be applied to variable or fixed costs, depending on the agreement. “The cost of living goes up. Why wouldn’t the cost of maintenance?” Krell asks, referring to the ever-rising price of everything from aluminum to rubber. But the financing of the equipment itself is more likely to be locked in place.
- What is the exit strategy?
If everything goes according to plan, the life of a lease matches business demands, but product sales can change and production lines can be scaled back. It is why the clauses which guide the cancellation of a lease are just as important as those which put the deal in place.
“Am I locked into this for the entire time? What are my options for getting out of it?” Krell asks. “What happens if business changes and I need to flex up or flex down?” Just like a mortgage, there can also be “breakage” fees for ending an agreement.
Just be prepared that the penalties will be steepest at the beginning of a term, like the mortgage on a house.