5 Reasons Why Your Truck Lease Sucks
A lot of company owners & executives who are in the wholesale & distribution business, think they want to own trucks. However, the operational responsibilities and constraints associated with owning trucks may prove to be costly. In that situation, frequently, the next best option is to lease a truck. But not all leases are created equal. There are many types of leases out there. If certain precautions are not taken and patience is not in place, this can actually result in signing up and becoming a victim of a costly and unpleasant lease agreement.
Some leasing providers take advantage of companies who fail to read and carefully consider all the details of the lease agreement, and regrettably end up signing a contract that is extremely costly or difficult to get out of.
Below we have listed five reasons why your truck lease sucks.
#1 Residual Value Exposure
As with any agreement, never sign the dotted line prior to being sure you have a clear understanding of everything in the lease. Ask questions. If you don’t feel you’re getting a straight answer from the company representative, you should probably consider it a red flag and walk away. Some of the lease types you should avoid include the following:
- Leases that are left “Open-Ended” such as TRAC (Terminal Residual Adjustment Clause) Leases. An Open-Ended Lease makes the “Lessee” (Customer) responsible for the value of the truck at the end. Typically, in these situations the “Lessor” will get 3 competitive “wholesale” bids at the end of the lease to determine what the value is of that truck. Since these are “wholesale” bids they usually come in less than what the original residual amount was stated. This makes the Lessee responsible for that amount at the end which can significantly add to your overall cost of the lease.
- Capital Leases which give you a Lease to Own agreement. These types of leases might sound good now because you are financing the lease down to a small fixed residual value, so you have an opportunity to purchase the truck at the end and depreciate it yourself. But what happens 5 years from now might change your mind regarding the sensibility of these types of leases. That truck size/type may no longer fit your delivery needs. The technology and emissions standards may become obsolete. You can’t just get out of that truck lease unless you purchase it outright. If you do purchase the truck at the end, then you might not get the value you want for it when you sell.
When selecting a company for your truck lease, opt for one that is willing to openly answer your questions and have the terms clearly listed so all parties completely understand all aspects of the lease.
#2 Unpredictable Maintenance Costs
Having quality routine maintenance is crucial to the longevity of any vehicle, and especially trucks which are essential to the delivery of your product. So, keeping it on the road, rather than in the repair shop, as much as possible is important.
Although, mechanical difficulties or unexpected repairs are not always predictable, a quality long-term leasing program typically takes this into consideration and provides certain services such as, 24/7 roadside service, towing, tire repair and/or replacement. Also, take into account what your options are with the occurrence of your truck being in for repair. There are reputable companies that provide a similar replacement vehicle so you can continue business as usual until your truck is back on the road again.
Furthermore, a top-quality leasing company can offer bundled or “country club” maintenance plans to help fit your needs and budget and also keep your truck in optimal shape. This is because a respectable company will have a realistic understanding of all the mechanical repairs that could be required during the course of a lease and can help you budget for this.
If you read any of the following in a lease agreement, it would behoove you to ask more questions for clarity and make sure you’re not stepping into a bad situation:
- Leases that just include “Preventative Maintenance” (PM’s) on the truck. Remember that PM’s are just one aspect of operating trucks. There are follow up repairs, part replacements, tires, brakes, breakdown maintenance, rental fees to take into account. Remember that if a leasing company is just including PM’s then they are going to charge you back for everything else when it comes to maintaining the value of their truck.
- Leases that include “No Maintenance” on the truck. Leasing companies may claim you are free to choose when & where you want the service done. But this is just a gimmick to give you a lower monthly payment. What they don’t tell you is that you will end up paying more for maintenance out of pocket during or at the end of the lease that is required by the leasing company’s standards (since they control the asset) compared to an agreement where those items are already included in the lease.
Sketchy leasing agreements that label themselves as “flexible” lure you in with a “low monthly payment” and then essentially over charge you for everything that is not included.
#3 Lease Penalties and Fees
Quite likely if you are considering leasing, it is either due to time & resource constraints or as a means to conserve cash flow for future expansion of your business, and as such you require a firm number in regard to the monthly payment for a leased truck. Therefore, steer clear of any leasing terms that have any of the following:
- Lease payments that do not include sales tax already built into the rate
- Leases which do not include rental substitute fees built into the rate
- Leases with unrealistic estimated annual mileage allowances
- Leases which include insufficient annual licensing amounts in the rate
- No option to upgrade the truck during the lease term
- No options to terminate the lease early under extenuating circumstances.
One of the primary perks of leasing is to avoid hidden costs and reduce expenses, so avoid dealing with anyone who seems to waiver on fees or where you’ll incur ongoing fees that are not truly justified.
#4 Your Lease Doesn’t Reflect Your Business’ Needs
Whenever a leasing company representative fails to sit down with you and get an understanding of your needs, be wary. Some leasing companies just want to “move metal” because they have quotas to fill. They are just quoting you a generic truck because they “assume” this will work for you regardless of your individual business needs. That can compromise safety and lead to inefficiencies. A quality leasing company provides “consultants” who will come to your place of business and look at your particular operation to recommend the best truck(s) for your needs. The items they are looking at are:
- How you load product onto and off of the truck
- Where you are delivering to & picking up from each day
- How many stops you make each day
- What the size & weights of your product are
- How it’s packaged and secured once placed onto the truck
- What the time constraints you are put under each day
Sometimes the trucks you are using may work out just fine for your operation. But things can change in your operation. New technologies come out each year which can benefit your company’s bottom line. It’s always better to get advice from a professional in the industry who can consult you on the most safe and efficient trucks for your business.
#5 Ambiguous Leasing Warranties
Avoid committing to a lease that states the trucks warranty will cover most maintenance. There are several warranties on the truck covering different components of the truck. What these warranties usually don’t cover is routine maintenance (PM’s, brakes, batteries, belts, hoses, tires) and replacement vehicles for when your truck is in the shop. Replacement parts can take some time to order. Especially when the part is on “critical back order”. It could be weeks before you get your truck back on the road. A lot of times when the component breaks, the warranty has expired or doesn’t cover particular parts.
In addition, let’s say you do have to exercise your warranty. The OEM will want to see all your maintenance records performed since taking possession. If all preventive maintenance is not done at the minimum required level described in your service manual, they may void the warranty on your truck components claiming that your lack of adhering to the maintenance guidelines caused the component failure.
Again, carefully read and understand all warranties and exclusions, because when these are denied it will eventually add to your overall operating costs.
We’ve Got a Great Truck Lease for You
Suppose U Drive offers excellent benefits with their leasing programs, which include full service maintenance plans, replacements for mechanical repairs, assistance with taxes and licensing, as well as annual DOT inspections, and practically everything in between.
Also, the leasing terms offered at Suppose U Drive can be customized to suit practically any need or budget. Furthermore, their team of professionals makes the leasing process straight and to the point and will happily answer your questions and get you in a truck within a matter of minutes. For more information, visit our long-term leasing page.