Characteristics of Container Leasing Arrangements

Lease TypeDurationRepositioningMaintenance and RepairOther Issues
Master LeaseShort to medium termLeasing CompanyLeasing CompanyVariable number of containers (min/max). Variable lease duration. On hire and off hire credits/debits (depending on location and equipment condition).
Long Term Lease5 to 8 yearsLesseeLesseeFixed number of containers. Predetermined delivery schedule.
Short Term LeaseShort period / trip / round tripLesseeLessee 

Source: adapted from S. Theofanis and M. Boile (2009) “Empty Marine Container Logistics: Facts, Issues and Management Strategies”, Geojournal, Vol. 74, pp. 51-65.

Leasing a container is more costly than ownership from an operational standpoint, about 60% to 70%. Still, there is a large leasing market, with about 40% of the global fleet of containers owned by leasing companies. This confers flexibility and some leasing arrangements enable the lessee to leave the container back to the leasing company at its destination. If there is a surge in demand, a carrier can lease containers instead of buying them, particularly if the surge is expected to be temporary. Leasing arrangements come into three major categories:

  • Master leases. They are also called full-service leases or container pool management plans and involve a complex and comprehensive leasing arrangement where the leasing company assumes full management. This entails a set of conditions regarding the availability of containers and an accounting system, including debits and credits between contracting parties, depending on the condition of equipment at the time of interchange. The leasing company is responsible for the full management of the container fleet (maintenance and repair) and for repositioning following off-hire and contract termination. In many ways, the leasing company acts as a logistics service provider since it must allocate the distribution of its container assets in view of the transportation strategies of the lessee. Thus, it must ensure that an adequate supply of empty containers is made available for their customers as pick up locations.
  • Long term lease. Also called dry leases and commonly associated with the extended use of the leased container by an ocean carrier. This lease normally follows the purchase of new containers by the leasing company, and they do not involve any management service by the lessor. The goal of the leasing company is to amortize its investment over the lease period, which covers about half of the useful life of a container.
  • Short term lease. Also called spot market leases since the lease price is strongly influenced by current market conditions pertaining to the volatility of supply and demand. Such arrangements commonly take place when there is a temporary surge in demand, either cyclical or unforeseen. Because of its volatility, leasing companies try to avoid having a large share of their equipment on the spot market because of the risk of having idle containers, but realize that such a condition is unavoidable. Still, with careful planning, containers can be positioned to take advantage of local or regional surges in demand.

The recent trend has involved a shift from master leases to long term leases, particularly because of acute imbalances in containerized trade flows, such as between Pacific Asia and North America, which required the long-distance repositioning of empty containers. Under a master lease agreement, these repositioning costs have to be covered by the lessor. With a long term lease agreement, repositioning is assumed by the lessee. Leasing a container costs between $0.60 and 0.80 per TEU per day, depending on local conditions of supply and demand.