COLUMBUS, Ind. — Contractual agreements — like leases — are beginning to perform better than transactional agreements — like rentals — in the equipment finance industry, as customers balance higher prices with operational needs.
Commercial truck customers continue to pursue leasing compared to rentals, although the market for both is improving, Sherry Sanger, executive vice president of strategy and marketing at Penske, said during a fireside chat at the ACT Research Seminar in Columbus, Ind. on Wednesday.
“This environment, specifically contractual, is starting to pick up a little bit and feels [like it has] a little bit more momentum than what we saw earlier in the year,” she said. “We’re seeing the transactional part start to pick up a little bit, but it’s slow.”
Leasing still represents a challenge in the industry, but the market shows more promise than rental, Sanger said.
“We’re seeing things pick up a little bit right now, and so we look at each of those parts of the business in different way,” she said.
“The rental is highly transactional and is usually a good relationship for how the rest of the business is going to perform.”
Rental challenges
Rental challenges primarily come from overcapacity in the market, Sanger said. Indeed, Penske rental revenue declined 13% in the second quarter, Chief Executive Roger Penske stated in the company’s July 31 earnings report.
“When we think about the commercial rental market, it’s been a tougher market, but that is due to some of the overcapacity that we’re seeing in the market today,” Sanger said. “When we think about the lease market and the logistics market [at] this time, our team is pretty excited. They’re having a pretty good year this year.”
While the last couple of years have been “one of the most volatile periods that we’ve experienced,” there’s reason for at least short-term optimism, Sanger said.
“We’re cautiously optimistic right now as we think about the next couple of months,” she said. “The challenge that we see as we look to the next couple of years is vehicle costs across the board are on the rise and that has a serious impact on fleets and total cost of their operations.”
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