Interest rates are rising, COE prices are up, inflation is soaring and oil prices increases are simply merciless. For some businesses, these hit particularly hard, especially those where transportation is a main or even ancillary part of work and owning a fleet of commercial vehicles is crucial. These transportation costs comprise expenses associated with the movement of raw materials, finished goods, or retail products to customers and businesses. Direct costs such as fuel, maintenance and payroll are the primary components but also indirect costs like support vehicles and structures, distribution networks, and other overheads. Of these, the biggest problems a commercial vehicle owner would face come with the high upfront cost of building a fleet and maintenance costs. This is because either of these issues would mean a stoppage of business. Engaging a third-party company specialised in truck rental or commercial vehicle rental in Singapore would go some way towards managing these costs but otherwise, here are 5 common problems that keep commercial vehicle owners awake at night.
1. High Upfront Cost of Acquisition
As of May, 2022, COE for commercial vehicles stands at SG$51,0002, having been on a mostly steady climb for the past 1 year. Based on a brand new light commercial vehicle (LCV) such as the popular Toyota Hiace, listed at about SG$55,0004, a business owner is looking at forking out a whopping SG$106,000 on average per vehicle. This quickly multiplies when building up a fleet of vehicles. Using a commercial vehicle rental company would be a viable solution, as it frees the business owner from large front loaded cash outflows and breaks it down into smaller payments. An added benefit is that contract lengths can be customised so whether the lease duration is for a couple of months or years, it is equivalent to paying for a vehicle according to usage. This added flexibility can be liberating, especially in economic downturns where downsizing may be vital for survival or if exploring a new business venture.
2. Rising Interest Rates
Borrowers beware! The US Federal Reserve announced earlier that interest rates would be raised5 and promptly increased the Fed funds rate by 25 basis points. It was also said that interest rates would be increased 6 more times in 2022 and that 3 more were planned for 2023. This typically has a knock-on effect on borrowing rates in Singapore as well6. While leverage is one of the most common ways to finance a new or used commercial vehicle, those choosing to borrow to buy a van or truck will be offered car loan packages with ever higher interest rates with each Fed rate hike. A pertinent point to note, is that car loans come with fixed interest rates. This means that once accepted, the interest rate is locked in for the duration of the loan. This can be a good or bad thing, depending on the prevailing rising or falling interest rate environment.
3. Finding the Right Employees
Staff turnover can be a real show stopper. Without properly qualified or properly experienced staff to operate commercial vehicles such as panel vans and even larger trucks, business operations would come to a halt. Drivers need to be educated in taking care of the vehicles under their charge. Reckless driving or failure to give due care to its daily upkeep can easily diminish the life of a vehicle. Simple things like dragging gears and driving at a high RPM can put undue strain on engines. Not slowing down on uneven roads can damage vehicle suspensions too.
4. Breakdowns
Time is money to businesses, and every second lost is an opportunity cost. Breakdowns result in the vehicle being immobile and disrupts operational efficiency, resulting in loss of income.
Some of the most common causes are listed below.
Commercial Vehicle Breakdowns
Overheating can severely damage your van’s engine. It does not immediately cause your vehicle to stop working so if the driver ignores the overheating alert and keeps on driving, eventually the temperature under the hood would rise to the point where extreme heat warps the engine cylinders and pistons. Once this happens, the engine is a total loss.
A Flat or Damaged Battery causes ignition problems and malfunction of the vehicle’s electrical systems – the vehicle cannot start, or the engine starts then quickly dies, the headlights flicker amongst other signs. Although it can easily be rectified by changing the battery, it still takes some time to buy and install one.
A Faulty Alternator is related to a flat battery but much more serious is a defective alternator. Without one in working order, the battery that is used to start the vehicle and power the electrical systems will not work.
Electrical Problems come in a variety of flavours but they all spell trouble. A fatigued starter or solenoid, bad battery cable, blown electrical fuses or failed spark plugs can all cause a car to fail to start.
5. Maintenance
Maintenance costs can add up especially when managing a fleet of several vehicles. Aside from the expenses, it takes time away from its essential functions in the business. However missing servicing appointments could lead to greater mechanical problems down the road. It is a catch-22 situation that puts any business owner in a bind.
Maintaining Commercial Vehicles
Vehicle Inspections are a required part of vehicle ownership. It is a government mandated inspection regime that ensures that vehicle owners properly maintain their vehicles up to operational and emissions standards.
Servicing is a self imposed regiment that aims to mitigate potential mechanical failure and extend the service life of the vehicle. This averts the situation in which a vehicle is not repairable and lessens business disruption.
Tyre Replacement is recommended when the tyre thread reaches the minimum depth. Age, as well as usage determine if it is time to buy a new set of tyres. Using worn out or old tyres can be dangerous due to the compromise of the wheel’s structural integrity and traction.
Worn Gaskets, Seals and Valves form flexible joints between components. They prevent leakage or spills of liquids or gases. These ensure proper functioning of vehicles that may otherwise lose power or stop working altogether.
6. Benefits of Commercial Vehicle Rental
It is said that, “Amateurs hope, while professionals work”. When it comes to managing just one or even a fleet of commercial vehicles, ensuring that a company’s transportation and logistical needs can be absolutely business critical so why not leave it to the professionals to take care of it? By engaging a commercial vehicle leasing company to be in charge, there is efficient division of labour according to expertise. This is beneficial as it frees up the company from the hassle of owning commercial vehicles. Employees can be fully engaged in the principal business of the company, thereby fully utilising its manpower and maximising resources.
A commercial vehicle rental company also has the advantage of scale and related business contacts over a single owner. For example, the company that chooses to purchase its own commercial vehicle may be constrained by cost. The vehicle rental company is likely to have a larger quantity and variety of vehicles in its inventory. This gives it the ability to provide more flexibility to suit the business requirements of its clients, especially if the needs change from time to time. In this way, the leasing company can be said to be more specialised; customised to a company’s needs and requirements, and able to provide more personalised service.
Other than the daily management of the deployment of commercial vehicles, ownership also entails the burden of repair, maintenance and servicing. Fortunately this is a task that vehicle leasing companies can take on as well. With an expert team of professional automotive technicians it can easily undertake full maintenance servicing, freeing up valuable operational resources that would otherwise be needed to manage the vehicles. It truly is an absolute solution to overcoming the hassle of vehicle ownership.
