Paper Cutters, of Greenville, S.C., is a small manufacturer with a big reach. The company ships paperboard package lining directly to customers in states east of the Mississippi. Annual sales are $10 million to $12 million. In an attempt to operate more efficiently, the company since 1992 has leased six Kenworth T800 tractor cabs, five of them with sleepers, from PacLease, based in Bellevue, Wash.

"We weren't prepared to put in a program of our own where we could maintain that many trucks," says Randy Mathena, who started Paper Cutters in 1981. "The bottom line is that we are probably operating more efficiently now than before, when we owned our trucks."

Under the terms of the full-service lease, PacLease handles repair and maintenance of Paper Cutters' vehicles. The leasing company also relieves the manufacturer of substantial paperwork.

According to Mathena, the administrative burden of managing a fleet was a factor in Paper Cutters' decision to lease

A significant number of companies like Paper Cutters find it convenient to lease the cars and trucks they use to do business. In a 1992 survey, the National Association of Fleet Administrators, in Iselin, N.J., found that 63 percent of cars, vans, and light-, medium-, and heavy-duty trucks in fleets of 200 vehicles or less were leased. For fleets of 201 to 400 vehicles, the figure was 78 percent.

"The high cost of transportation and the need to be competitive are important factors in the popularity of leasing," says Dick Cromwell, vice president of marketing for Idealease, a Barrington, Ill., truck leasing and rental firm. "Companies are not only trimming work forces but also expenses to regain profitability. They are focusing on what they do best and contracting out those ancillary services others can take over for them."

Businesses report several advantages to leasing their fleets. Doing so allows a company to use capital more efficiently, deduct lease payments, and avoid the paperwork inherent in buying and owning a vehicle. Another advantage for some lessees is the availability of nationwide maintenance services, where drivers use charge cards for vehicle-related expenses. The fleet manager pays one bill, minimizing expense-account paperwork.

A growing number of companies that lease midsize and large trucks are opting for full-service leases, where the lessor handles maintenance and repairs, as well as administrative tasks such as licensing and tax reports. A study done for the Truck Renting and Leasing Association, based in Washington, D.C., found that last year about three-fourths of leases for midsize and larger trucks were full-service, up from just over haft in 1991. Full-service leases usually mean fewer costly breakdowns, lower repair bills, reduced parts inventories, and elimination of the need for a company repair shop. Also, annual operating costs can be forecast, capital can be used more efficiently, environmental compliance on matters such as waste disposal can be handled by the lessor, and the fleets can be more up-to-date.

Griffith Micro Science, Inc., a Burr Ridge, Ill., company that sterilizes surgical instruments for hospitals and clinics, leases 15 passenger cars and minivans, along with two midsize trucks, through USL Capital Fleet Services,

in San Mateo, Calif. Most of the vehicles are used by a nationwide staff of salespeople who call on the hospitals, clinics, and other customers.

"We are getting good cost per mile and helpful fleet-analysis information, plus good advice on options to consider for the best resale and safety," says Dick Rediehs, Griffith Micro Science's director of finance and administration. "For the size of the fleet we have, full-service maintenance from USL Capital is better than trying to employ someone full time to administer it."

How long should a company lease a vehicle? Opinions vary on replacement cycles. Some fleet managers are stretching the number of months and miles as a money-saving measure, while others are staying with the lease terms they have used for years.

Rediehs of Griffith Micro Science leases vehicles for three years or 72,000 miles, up from the company's previous limits of two years or 50,000 miles.

"I don't see a big change in the cost from 50,000 to 72,000 miles," he says. "I always felt the cars had a useful life beyond the 50,000 miles. With the new replacement policy, we have had no squawks from the drivers of the cars."