Do you really know what you’re getting into?

–General vs. Industry Specific Leasing.

How different is Commercial Vehicle leasing from General Equipment leasing?

My specialty and experience has all been related to the commercial vehicle industry. And so I would say that I'm not really qualified to answer that question. However, I can share with you some of the pitfalls that I've seen many of my clients go through when they added commercial vehicle leasing to their general leasing portfolio.

Many of the leasing companies that I've consulted for the past have felt the need to maintain a high rate of growth in order to meet income and tax deferral requirements. This need for growth has sometimes led them into financing or leasing equipment in industries that they were unfamiliar with. We have all been tempted to make similar mistakes. When this happens to a general leasing company that ventures into the commercial vehicle arena, quite often I am called to help contain the damage.

Here are some of the common pitfalls that these companies run into while trying to venture into the industry.

·       Having to pay backdated DMV registration on assets that have been re-marketed and sold prior to clearing the title. Many times the amounts due exceeded the disposition amounts. (26k on a single truck is the record so far)

·       Improper knowledge of how apportioned plating and interstate registration affect sales and use tax on rolling stock. This is very important when dealing with multistate jurisdictions, deliveries, use and titling. This is an audit waiting to happen.

·       Improperly valuing the collateral at inception.

·       Improperly gauging the rate of asset depreciation. (Monitoring the LTV throughout the life of the lease)

·       Improperly servicing a portfolio because you are unaware of industry intricacies.

·       Not understanding your borrower or the culture in which they operate.

·       Not understanding proper methods and processes of collateral disposition. (Hence the DMV fees)

Almost all of my experience is based within the trucking and transportation markets and I know that this makes me very industry-specific in an environment where general leasing seems to be the norm. Because of this limitation, I would be very hesitant to immediately dive into other types of leasing such as concrete forms, restaurants, neon signs aircraft or whatever. If I were to choose to enter these industries, I would ensure that I had credible subject matter experts in these fields on staff, before diving into unfamiliar business. Sometimes, when one of our traits is being opportunistic, we tend to shift our business model without realizing it, as a portion of your non-niche business increases to become a significant percentage of your portfolio. 

When this occurs, ask yourself, “Do I really know what I'm getting into?”  Because, I'm willing to bet, that we don't.

I have had to give up my usual diet Pepsi, so I need to find another zero calorie, non-soda flavored beverage. Any Suggestions?