Elvin Spellman, Peter Verbeeck, and Michael Hribar field questions during the “Managing a Rental and Leasing Fleet for Dealership Profit” session.
THE NTDA assembled a panel with three trailer dealers—representing small, medium, and large facilities—and allowed them to address key issues they face.
They were: Elvin Spellman, treasurer of Spellman Trailers Inc, Franklin, Wisconsin; Michael Hribar, president of Amston Supply, Caledonia, Wisconsin; and Peter Verbeeck, sales and leasing manager for Florida Utility Trailer, Hialeah, Florida.
NTDA president Mike Dye served as moderator.
Q: Your customer comes to you and says, “I want to rent this new trailer.” How much of a credit check and background check do you do, and what type of insurance coverage do you look for to get started?
Hribar: When we get a new client, we have him fill out a credit application and do a check on their credit. We also require a security deposit—the first month upfront—before the equipment goes out.
Spellman: A lot of people we’ve known through the years. Some of these people maybe financially aren’t the best, but you’ve known them for years and know you can get your money. We do take the first month’s rent upfront and an insurance certificate.
Q: When you first got set up, did you set up a separate entity or company, or did you run all rentals or leases out of your original company?
Spellman: We set it up with the original company. When we started in 1990, we had no clue how big we’d get. It’s within the same company for us.
Verbeeck: We have the same company, but it’s really important to have insurance packages clear, concise, and confirmed. Your client is going to provide you with a certificate of insurance. If he ends up having a loss, you want to make sure it doesn’t come out of his pocket and that he’s insured. And that your own dealership has an underlying coverage for liability. And then you have the third tier, which is contingent liability insurance. And not too many insurance companies do that, but it’s important to have that contingent there as a third layer.
Hribar: In our business, we grew into it, so we do not have a separate company. Maybe looking back now, I’d have set it up separately.
Q: The customer brings a trailer back and it’s damaged. He says, “That’s normal wear and tear.” And you say, “No, that’s damaged.” Is that a constant problem or an occasional problem?
Hribar: We have a checklist of equipment before it goes out. We take pictures of it and to complete the inspection. All trailers we rent out are up to date on DOT, and tires and brakes are 50% or better. We walk around with the client. And before they leave, they sign off on a sheet of damages and the trailer is released from there.
Verbeeck: We try to be thorough. We’ve tried to take pictures, but that became a nightmare doing that, so we stopped. When the equipment comes back, you can get into some issues. But our contracts are pretty clear. The single biggest item would be the tires. We decided we didn’t want to have anything to do with tires. We want to make sure right off the bat that we give them a decent set of tires. If they are renting six months or more, we’ll just put on new tires. Or if they’re used, we need them to be in excellent condition. We measure the depth of the thread of each tire and put down if it’s original or cap. We’ll state the replacement value of the tire right on the contract, and for each 32nd we’ll bill you $38 on an original, $14.50 for a cap. So when it returns, we’ll bill them the difference between the two. Dry vans and flatbeds are pretty easy. Reefers are another issue. If things go wrong—belts, it needs an oil change, filters—we’ll cover that. It’s all part of the contract.
Spellman: Being a smaller dealer, we won’t rent to anybody out of state. They have to be in Wisconsin. We know the majority of people. We have few problems when trailers are returned.
Q: What is the general age of the equipment?
Spellman: I would say right now on vans, customers are wanting to turn those back after 10 years. I think lot of shippers are telling them they don’t want to see anything past 2003, so on flatbeds and drops, I think the oldest we have is ’04, ‘05. A lot of times for us, we use a quick depreciation schedule that allows us after five or seven years, if you time the market right when used equipment is in demand and you have that thing at zero or close to zero, it’s profitable. That got us through ‘09 because we were so aggressive in depreciation that we were able to sell a lot of equipment going into ‘09 and come out of that better. There’s a niche for a market for a 10-, 15-, 20-year-old trailer, then it goes into storage locally to some corporations. You can make that last a long time.
Verbeeck: Flatbeds will go up to 10 years. Generally speaking, what we have sitting in our lot is 2000 or newer. When we get into dry vans, we take a look at equipment and the kind of condition it’s in. Generally speaking, the oldest one would be 2008. But we do put out new equipment. We know there is minimum period of time they will go out, and that’s part of what we budget each year. Now reefers are a whole different animal.
Hribar: I started with new equipment. Occasionally I’ve trickled some used in there. ♦
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