Leasing's link to efficiency - managing company car costs - includes list of truck rental companies

Nation's Business, May, 1995 by Julie Candler

This alternative to buying vehicles can be an effective way of consolidating a company's costs.

To develop and distribute hybrid corn and other agricultural products, DEKALB Genetics needs cars and trucks. Nationwide, the DeKalb, Ill., company uses 600 vehicles, including minivans for sales personnel, passenger vans for transporting workers to the fields that are DEKALB's laboratories, passenger cars for management, and about 350 trucks, most of them pickups, for delivering products to customers.

Julie Rautio, DEKALB's fleet manager, says the company leases most of the vehicles it uses. A key advantage of leasing, she says, is uniform pricing--a plus that a company cannot count on when it purchases its vehicles. "A few years ago, we were negotiating prices locally at a lot of different locations," she says.

DEKALB consolidates fleet administrative costs by taking advantage of maintenance services offered by the three leasing companies it deals with: Automotive Rentals, Inc., Mount Laurel, N.J.; Erakay, Inc., Itasca, Ill.; and GE Capital Fleet Services, Eden Prairie, Minn.

The leasing companies provide coupons good for routine services at participating garages. At month's end, the companies bill Rautio for the maintenance, and she sends each of them a check. Anytime she is not sure that recommended repairs are necessary, she consults with the leasing company's experts.

DEKALB is among the many companies that are finding that leasing is an effective way of managing cars and trucks efficiently and economically. For example, in a recent survey that drew responses from nearly 500 managers, the National Association of Fleet Administrators, based in Iselin, N.J., found that overall the respondents expect to lease 71 percent of the 1995 model year vehicles they acquire.

Businesses point to several advantages of leasing the vehicles they use. Doing so not only allows a company to deduct lease payments as business expenses but also eliminates paperwork related to buying and owning a vehicle. Another advantage for some lessees is the availability of nationwide maintenance services, where the fleet manager pays one bill, minimizing expense-account paperwork.

Leasing is not necessarily for everyone, of course. Owning its vehicles gives a company more flexibility in choosing them. It also allows the business to deduct depreciation and interest. And total operating costs per mile are often lower if the vehicles are owned rather than leased.

Still, leasing is a viable option for many companies. And a growing number of businesses are signing up for the extra services that leasing companies provide.

Dave Dawson, spokesman for Miami-based Ryder Commercial Leasing & Services, expects a 30 percent increase this year in the company's logistics business, in which Ryder handles trucks, drivers, warehousing, and routing--the entire distribution system. "The market is asking us to provide new, more customized services," Dawson says.

Tom Fleming, president of Aim NationaLease, based in Girard, Ohio, also notes demand. "Our dedicated-contract division, which manages trucks, drivers, and routes, is growing fastest of all," says Fleming, whose service also spares fleet managers the headaches of hiring.

Similar services are offered by Mack Leasing System, based in Allentown, Pa., now beginning its ninth year of operation. "We are concentrating efforts toward a dedicated logistics partnership," says Thomas D. Thayer, director of leasing. The system, a wholly owned subsidiary of Mack Trucks, Inc., provides full- or partial-service leases and commercial rentals of heavy-duty Mack trucks at 145 locations nationwide. The service also handles leases of midsize trucks built by other manufacturers.

The leasing services cater to companies of all sizes. For example, PHH Vehicle Management Services, based in Hunt Valley, Md. has a special market-services group that caters to fleets with up to 75 vehicles.

"A large fleet has an expert on taxes, funding, negotiating, and ordering the right services," says Buck Whitman, vice president and general manager of the market-services unit. "A small fleet may have someone part-time managing the vehicles .... That's why PHH created its special segment for less than 75 vehicles."

Dundee Mills, Inc., a Griffin, Ga., manufacturer of towels, baby clothes, and other products, leases 29 passenger cars from the PHH unit. The fleet of Buick LeSabres, Oldsmobile 88s, Ford Tauruses, and Dodge Intrepids is used nationwide, chiefly by sales representatives.

"You couldn't ask for better management," says Dianne Niblett, Dundee's corporate fleet manager. "We were looking to hold costs down, and they advised us to take advantage of [available price incentives]."

Leasing became practical and economical for MEDIQ, Inc., when the Pennsauken, N.J., company consolidated the transportation needs of nine subsidiaries, which included a mobile X-ray service and a maker of pharmaceutical containers.

"Until six years ago, each of our companies did [its] own thing," says Ron Lasman, corporate director of fleet services. "Some leased. Some owned. They essentially were running down to the dealer or calling a local leasing company and getting what was available. Then we adopted a corporate policy to umbrella everything under one lessor."