Sale Leasebacks Meet Competing Needs

Structured transactions offer flexible, affordable fleet expansion and replacement during uncertainty

For some U.S. businesses, the COVID-19 pandemic caused the front-loading of peak season, pushing them to operate at peak earlier in the year to try to keep up with unprecedented demand. The coronavirus also forced many brick-and-mortar stores across the country to shut their doors while consumers quarantined, leading to a surge in online purchases. While this paradigm shift to e-commerce was going to happen, the pandemic accelerated what was inevitable and, I believe, is here to stay.

Due to the longer peak season and explosive e-commerce growth, many companies required more trailers to meet demand. However, business uncertainty and an inability to forecast the future caused many companies to slow down on buying new trailers to preserve their balance sheets. In addition, trailer production decreased due to the same reasons and because of the closure of trailer manufacturing facilities as a result of COVID-19.

Now that the economy and supply chains are stabilizing, more companies want to buy new trailers while retaining their old ones to keep up with increased demand. Companies have also realized they need more capital sooner than they planned to finance these trailers, but are uncertain whether this surge in demand is permanent or temporary, and what appropriate trailer fleet size is needed. 

Therefore, their challenge is twofold, as they must balance these competing needs:  

1. Need to increase capital expenditures to add new trailers and 
2. Need to retain the older trailers they would normally sell to help raise that capital, as well as being unsure how long and how many of the older trailers they need to keep in the future.

Sale-leaseback structured fleet transactions have proven to be a viable solution to meet these competing needs, as they allow companies to access the equity in their current, older trailer fleet by selling assets to finance the purchase of newer trailers. Fleets can also utilize multiple lease terms on the leaseback of their older trailers to give flexibility on overall fleet size over time as demand potentially rationalizes. 

If you are looking to offer sale-leaseback structured fleet transactions to your customers, it is important that your company embodies the following qualities as a lessor: 

1. Extensive financial expertise and experience working with lenders and other lessors.
2. A network of physical locations to help smoothly integrate trailers into your customers’ networks.
3. Exceptional, personalized customer service and ease of underwriting to find the best solution for your customers’ unique needs.

The COVID-19 pandemic has spurred greater consumer demand and changed how consumers shop. In turn, this has altered how goods flow through the supply chain to the consumers’ hands, resulting in a much higher number of trailers needed. Now more than ever, innovative solutions like a sale-leaseback structured fleet transaction have enabled companies to manage their trailer fleets and maintain their balance sheets while addressing fleet changes needed to meet current challenges.