Opinion: Leasing Makes Hybrid Trucks Affordable

By Olen Hunter
Director of Sales
Paccar Leasing

This Opinion piece appears in the Nov. 30 print edition of Transport Topics. Click here to subscribe today.

Interest in adopting environmental initiatives remains high among trucking firms in spite of the difficult economic conditions in which they’re operating, according to a new survey conducted by PHH Arval. Results of that survey were reported in the Transport Topics 2009 “Top 100 Private Carriers” supplement to the Aug. 3 issue.

Based on the reported experiences of early adopters of diesel-electric hybrid truck technology, many fleet managers and owners see the operational benefits of acquiring new trucks with fuel-saving hybrid diesel-electric powertrains. Hybrid diesel-electric trucks save upward of 30% to 50% in fuel — depending upon the application. Plus, they reduce their exhaust emissions of hydrocarbon, carbon monoxide and nitrogen oxide because they use less diesel fuel.

Many early adopters see hybrid trucks as a way for their companies to demonstrate a commitment to environmental stewardship.

While many companies are considering adding hybrid trucks to their fleets or replacing older models with hybrids to take advantage of potential fuel savings, questions still abound about justifying the additional cost associated with acquiring the new technology. According to the Arval survey, half of the fleet managers surveyed (54%) said cost was the top challenge in “greening” their fleets.

That additional cost can leave many wondering how they can afford to add hybrid trucks to their operation. Acquiring them through full-service leasing could provide the answer.

With a full-service lease, companies pay for the use of the truck — not the truck itself. This approach often can provide cash flow and operational advantages to ownership. A full-service lease takes the purchase price and projected maintenance costs and subtracts the residual value. For a hybrid, after factoring in fuel savings, plus tax credits from state and federal governments, the cost per month of leasing can be close to that of a nonhybrid truck.

Whether — and how quickly — operators realize a positive return on investment from leasing hybrid trucks will depend on fuel economy, fuel prices, the length of the lease term and the number of miles their trucks travel.

For example, with diesel fuel at $3 a gallon, the effects of leasing and operating a hybrid truck over a seven-year term can mean paying an additional $95 a month over the cost of leasing and operating a similarly sized and equipped standard diesel truck. But as diesel fuel costs increase, those companies begin to realize a positive ROI through fuel cost savings.

There are other benefits full-service leasing offers:

• It assures tax credits of up to $12,000 for each hybrid truck. There’s no risk of having to wait for the federal tax credit to be processed by the Internal Revenue Service, because the lease rate already reflects the value of the tax credit. While the tax credits sunset every year, the federal government is expected to re-establish them for the next tax year. Companies should discuss this with their tax advisers and leasing provider representatives.

• Companies leasing hybrid trucks under full-service leases reduce their exposure to maintenance costs because the leasing provider handles all the maintenance on the hybrid.

• At the end of the lease, when companies return the hybrid trucks, they’re sheltered from fluctuations in residual value.

For companies that operate in California, the California Air Resources Board and local air-quality management districts provide grants to help acquire cleaner-burning vehicles. Adopting hybrid technology also can help fleets meet CARB emissions requirements more quickly, because they get double credit for replacing older, higher-polluting diesel-powered units with the hybrids.

For example, if a truck operator leases a hybrid diesel-electric truck that achieves 20% or greater fuel-economy improvement over a comparably equipped standard diesel vehicle, the operator can receive double credits toward the emissions targets until 2017. Those additional credits can give the truck operator more time to run high-value or unique trucks that are difficult to replace.

Knowledgeable leasing providers can assist those companies in determining their qualification for local and state grants and help companies develop an asset plan that meets CARB goals and timelines.

If you’re considering adopting hybrid truck technology into your fleet operation, full-service leasing may offer an efficient, cost-effective way to do it.

Paccar Leasing (PacLease), based in Bellevue, Wash., provides customized full-service leasing, rental and contract maintenance programs designed to meet the specific needs of customers.