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What are Different Types of Container Leasing Policies? | LOTUS Containers

Updated: Jul 14, 2021


Generally, container leasing policies tend to be 60% to 70% more expensive than buying, yet it scores the majority of the votes and preferences by the shippers, freight forwarders, and carrier companies across the world. A number of reasons stand in its support- Leasing, when seen from an operational point of view offers greater flexibility and ease in comparison to buying.

When you rent a container, you do not have to bother about its positioning or transporting its way back to the supplier’s port, etc. The supplier company takes the entire responsibility and gives you the freedom to leave the container at the trip destination. This flexibility saves you from a lot of burden and cost as well.

What is container leasing?

Container Lease is an agreement signed between the container owner (lessor) and the shipper (lessee) stating the terms and other related information thereby allowing shippers to use the equipment for the defined period while complying with other mentioned obligations.

What are its key benefits?

You don’t have to maintain container assets on the balance sheet under an operating lease policy

  • It enables you to acquire boxes for any length of time (from 3 months to 15 years)

  • It offers immense flexibility in terms of positioning.

  • It does not eat space by being at your location which means you can be free of them by returning them to the supplier after the tenure is over.

  • It also benefits with a purchase option upon the completion of the lease duration.

Keeping in light customers' requirements, budget, and duration, container suppliers present a plethora of leasing options in front of the customers.

1. One-Way Lease: One Way Lease or OWL is a kind of lease service that enables shippers to move the container loaded with cargoes one time on any route. Through this, the customer has an opportunity to rent a container that can be picked up at one location, and use it for a cargo shipment in one trip and return it to another location. (E.g. If A wants to ship the cargo from Hamburg to California, then A can go for a leasing shipping container in Hamburg and after the cargo is exported to California, then drop the OWL container there in California only.) This creates a mutual benefit among suppliers and customers both in terms of transportation cost and streamlining operations.

Let us understand this with an example

You hire a container through OWL on port A, loaded your cargoes in it, and set it for the transition to port B. You unloaded the container at port B and called your supplier to take care of the empty container. And there your work gets over. Your supplier reaches your destination and takes the account of that empty container to their location. In this way, you don’t have to worry about empty container repositioning.

How OWL offers tremendous benefits?

  • Cost-effective

  • Save time managing equipment imbalances

  • No involvement of container repositioning cost

  • Helps to escape from asset management & storage cost

  • Available at every supplier’s door

2. Long Term Lease: Long Term Lease or LTL is a type of leasing option strongly preferred by shippers looking to rent freight containers for a longer duration which varies between 10 to 15 years. The duration equals about full life or half of the life of containers.

LTL is applicable for a fixed duration which means the equipment can be used only till the defined duration. And the lessee is obliged to return the equipment on the given date. Any delay in returning is compensated through penalties levied on a daily basis. The containers must be returned on a customer-defined location just after the end of the duration.

Under LTL, the lessee is responsible for all sorts of container management during the contractual period, which includes maintenance, repairs, transportation, and also repositioning.

At the end of the duration, the lessee is basically left with two options- either he can return the container to his supplier or can get an extension by renegotiating the term.

3. Master Lease Agreement: Among every other available option, Master Lease Agreement or MLA is one such option that offers a great amount of flexibility to the lessee. Unlike LTL, it does not bind customers with a fixed duration, rather it is variable and hence can be altered at any point of time. The lessor is accountable for the entire management of the container fleet (maintenance & repair) and repositioning. This is mostly suitable for short term and seasonable requirements to meet customer’s needs.

For those looking to rent cargo containers during the high season when suppliers often go out of stock, MLA can work as a life saviour. The duration of the term is variable and is based on credits. Under MLA, the leasing company also acts as a logistics service provider as it has to be available for the container positioning according to the customer’s pre-defined transportation strategies.

4. Short Term Lease: Since the name itself define, Short Term Lease is a leasing policy that enables shippers to acquire containers on lease for a very short period. The duration may involve one way or round trip on a vessel. Sometimes, it is also referred as spot lease or trip lease. Unlike, MLA, in STL, the lessee is himself responsible for all sorts of associated costs of re-positioning, maintenance, and repair.

Container leasing company usually tends to avoid leasing a large portion of the fleet on Short Term. This is because the leasing rate is dynamic and strongly influenced by the current market condition. A small alteration in market conditions fluctuates the price widely. During the low demand period, the risk exposure of short-term lease is high due to the expected increase in the volume of containers.

5. Lease-Purchase: Lease Purchase is the heart of people looking for rent to own containers. It allows lessor to lease equipment for a fixed duration of time. It offers unique benefits as it allows for transfer of ownership which means at the end of the duration and payment of outstanding rental payments, the lessee owns the right to purchase the container.

Conclusion

Container leasing companies really offer customers a way to acquire containers with immense ease and flexibility in terms of budget, duration, and repositioning. They have their global networks of services connecting the major trade routes. In order to meet the requirement of customers, lessor also has to lease equipment from other big suppliers. Thus, the above containers leasing policies are not only meant for shippers but also for small companies who lease containers from big suppliers and lease further to their own customers.

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