Central Oregon Truck Company
FMV Leasing Through PACCAR Financial Helps Oregon Flatbed Hauler Grow - July 2013

At a time when many other flatbed carriers closed their doors, Redmond, OR based Central Oregon Truck Company grew and expanded during the recent recession.

“We’ve stayed competitive by lowering our fleet operating costs and providing our customers timely deliveries,” said Central Oregon Truck chief executive officer Rick Williams.

Central Oregon Truck hauls building materials, heavy equipment and other loads for major manufacturers of building products.

Williams attributes his company’s success to a laser-like focus on every performance aspect of the company’s fleet of 223 trucks, mostly Kenworth T660s, and 237 flatbed trailers. The company keeps close tabs on vehicle performance and governs the engines to 62 mph. Idling is limited and drivers are encouraged to check tire pressures regularly.

The aerodynamic performance of its Kenworth T660s, equipped with 62-inch and 72-inch AeroCab FlatTop sleepers, when compared to the performance of the trucks they replaced, helped Central Oregon Truck save on fuel costs during the height of the recession. Central Oregon Truck saved more than $300,000 on an annual basis when fuel costs spiked at $5 per gallon.

“Controlling operating costs helped our company stay competitive and allowed us to expand our lanes and serve more customers after the recession took out capacity when other flatbed carriers went out of business,” Williams said.

Even the way the company acquires its trucks meets the company’s focus on controlling costs. The company acquires its trucks from Pape Kenworth in Portland by using a fair market value (FMV) lease through PACCAR Financial. FMV leasing allows the company to make a lower monthly payment than what it would pay if the company financed the trucks under a standard finance loan. Central Oregon Truck’s payment is based on the purchase price minus any down payments and what PACCAR Financial estimates the trucks will be worth at the end of their lease terms.

“Fair market value leasing gives us a predictable cost of financing through the life of the truck,” said chief financial officer Paul Coil. “And it gives us a known cost factor that we can rely on.”

“The nice thing about an FMV lease is that we don’t have to worry about what to do with the truck at the end of the lease term,” Williams said. “We can walk away or buy the truck.”

Coil said FMV leasing also offers the company the ability to save its traditional financing capacity for other capital needs. FMV leasing made it easier for Central Oregon Truck to borrow money to pay for the consolidation of its company headquarters and its maintenance facility into a new 28,000 square- foot building located in Redmond, he added.

“While the payments are disclosed in the footnotes of our balance sheets, since FMV leasing is not a capital lease, we can operate with lower debt-to-equity ratios, which facilitates other traditional financing with banks for other equipment or needs,” he added.

U.S. Generally Accepted Accounting Principles (GAAP) only require lessees to account for lease payments as expenses on their income statements. They don’t have to report the assets they’re leasing. This off-balance sheet treatment allows companies to keep their debt-to-equity or leverage ratios low. These ratios are used as measures of a company’s financial health and risk, but more importantly, lenders frequently incorporate them into loan covenants in the form of limits to how much the ratios can change without the borrower being in breach of the covenants. Low ratios make it easier for companies to borrow money for other needs, projects or opportunities.

Leasing trucks through PACCAR Financial also makes it easier for the company to try new equipment that could help lower its operating costs. Most recently, the company ordered five new Kenworth T680s equipped with integrated 76-inch sleepers and PACCAR MX-13 engines, which the company will evaluate for their fuel-saving performance.

“One of the advantages of dealing with a financing provider like PACCAR Financial is that they know our company and our business very well and they know and trust the equipment they are financing,” Coil added. “They encourage us to try new equipment like the Kenworth T680 with a PACCAR MX-13 engine by establishing good residual values for the trucks. And when we are ready to lease new trucks, the paperwork associated with the transactions is straightforward making the leases easy to execute.”

Williams said he’s also come to appreciate the relationship that his company has developed with PACCAR Financial over the years.

“They do what they say they are going to do and they treat us with respect,” he added. “The folks at PACCAR Financial know there are good times and there are bad times and they stick with us through either. With PACCAR Financial, we feel like we have a financing provider that understands our business, our industry and the equipment we run and offers us the kind of financing we need to be successful.”

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