Fleet Financing: Cost-Effective Strategies for Evolving Collection Equipment

By choosing the right financing structure and finance provider, waste services providers can more easily adapt to the evolution of today’s equipment.

By Chris Lewis

Rapid changes in technology are significantly impacting equipment design in the waste services industry. These advancements contribute to safer and more environmentally friendly trucks and components, all of which leads to more efficient operations.

With this shift, however, comes a new pressure for waste services companies. Rapidly changing equipment means that fleet upgrades must be made more frequently, which can lead to financial strain if not handled properly.

For this reason, many in the industry are re-evaluating equipment financing options in order to keep their fleets up-to-date without jeopardizing their bottom line.

Evolution of Equipment: What is Changing and Why?

The two primary factors influencing equipment upgrades in the current market are safety and sustainability. Safety is paramount in this industry. Workers in waste and recycling collection experience fatalities at rates 10 times higher than the U.S. national average, and four times higher than the construction industry.

In fact, of injuries sustained on the job in the waste services industry, about 25 percent of those are due to truck backing incidents—demonstrating the importance of new equipment designs and safety features.

Components designed to keep drivers more aware, such as backing sensors and cameras, are constantly improving. Access to these advanced technological features is invaluable to safety.

Additionally, there is a major shift underway from fleets comprised of front load collection trucks to those with side-mount lift components. These side-mounts are critical to safety and have the potential to vastly decrease the rates of injuries and death, as they enable drivers to stay in their trucks during collection.

This design also requires only one driver, which, as an added benefit, is more efficient and cost-effective for companies. Beyond safety, environmental concerns remain paramount in the waste services industry. Regulations are tightening, and most companies in the industry are shifting to collection trucks that run on compressed natural gas (CNG).

These vehicles are more sustainable and healthier for the environment than diesel trucks, and they make more sense economically. Equipment run on CNG is less likely to break down—helping waste services companies to save both time and money.

Waste service trucks are already the fastest-growing segment of vehicles to run on natural gas, and the industry is on the path to make a continual move towards CNG over the next 10 to 15 years as more states, counties and cities in the U.S. mandate its use.

In fact, in just five years, many waste collection fleets will no longer meet local standards and will have to be replaced with upgraded vehicles. For example, many ports now have zero-emissions requirements in place, which will force companies to replace fleets with CNG equipment.

As regulations like these expand in the U.S., companies across all industries, including waste services, will need to position themselves to quickly adapt their fleets to these changing standards in order to seamlessly conduct business as usual.

Financing Strategies For Today’s Evolving Equipment

As waste services professionals respond to the increased pressures brought on by tightening regulations and rapidly improving safety features, a bottom line question emerges: “How can I easily upgrade my fleet and keep up with technological advances without losing money?”

Traditionally, waste service companies have either purchased their equipment or financed them through capital leases, meaning they could spread out their payments over time but they still own the equipment at the end of the lease term. These strategies served the industry well for many years, as waste collection equipment historically enjoyed a long lifespan, and could be used for many years after payments were complete.

But today’s equipment requires a mindset shift when it comes to financing. The fact is: it is no longer prudent to own fleets outright. Instead, many in the waste services industry are switching to operating leases, through which they can:

  • Acquire the equipment they need
  • Pay for that equipment via monthly payments over time
  • Give the equipment back at the end of the term

This structure delivers the truest benefit of a lease—the ability to trade in a piece of equipment at the end of a term for the latest and greatest.

For example, if a mid-size waste collection business spends $8 million over seven years leasing vehicles on a capital lease, they will own the equipment at the end, however it is very likely that technology will have changed during those seven years, and the company now owns an outdated fleet.

If the same company leased the vehicles on a operating lease, they would pay $6 million, use the equipment during the lease term, then be able to easily turn the equipment in and upgrade to an upgraded efficient fleet at the end of the term.

Whether a fleet is comprised of 15 or 5,000 trucks, it is important that each one meets or exceeds current standards of technology, safety and sustainability. By choosing the right financing structure and finance provider, waste services providers can more easily adapt to the evolution of today’s equipment, and ensure seamless and cost-effective operations for years to come.

Chris Lewis is a Regional Manager at Summit Funding Group, a Mason-OH-based company that provides equipment lease and finance solutions to businesses across the U.S. and Canada. Founded in 1993, Summit Funding Group has originated more than $3 billion in equipment lease and finance transactions to date. Chris can be reached at clewis@4sfg.com.