How to Determine a Commercial Truck’s True Operating Cost: Buy-Use-Sell

operating-costsThe true cost of commercial truck operation extends far beyond the purchase price to include choice of financing, expected utilization, and resale value. Overall commercial truck operating costs can be lowered when the buy-use-sell phases are viewed as a continuum and an opportunity to increase profitability.

There are a lot of moving parts in determining the total cost of commercial truck ownership of a commercial truck.  If you’re in procurement, you may think getting the lowest price and the best financing for the new vehicle has the biggest impact on total cost. For those who manage operations, it might be all about getting the best fuel efficiency and keeping the cost of maintenance and repairs to a minimum. And for those responsible for disposing of the asset at the end of its useful life, you could think getting the best possible resale price for the vehicle can have a significant effect in overall cost of ownership.

For those of us who work in financial services, we say that each step in the commercial truck life cycle process is equally important to the bottom line and each plays an integral part in determining the total cost of ownership. In an ideal scenario, procurement, operations, and remarketing departments should collaborate fully to help the fleet accomplish its end goal, which should be to run at the lowest possible cost-per-mile.

It’s unfortunate that in many fleet management scenarios operate in silos, with the finance manager having little understanding of day-to-day operations and what specs are needed to run one truck 120,000 miles a year on highway, while another runs short delivery runs in an urban area. And both departments probably struggle when it’s time to dispose of the truck. Should they sell it at auction? How can they differentiate it from the other vehicles for sale? Should they hire a remarketing company for the task?

Sometimes it benefits a commercial truck fleet most to re-think the way it does business; to take a fresh look at its internal processes. Fleets need a new way to evaluate life cycle costs. For example, before a financing solution is even considered, you should take an objective look at the full picture, which includes vehicle specification, actual acquisition costs, maintenance costs, historical fuel economy costs, and utilization patterns. Using that information, you can consider how long the vehicle should be used before repairs become too expensive. Think about the eventual resale value of the vehicle at the end of its useful life. Choosing the right commercial truck now can lead to profitability years ahead when it’s time to sell.

Using this kind of data-driven intelligence, you can determine how to most cost-effectively buy, use, and sell a commercial truck before choosing a financing option that will work best for that truck. The solution may not be the same for each asset in the fleet.  You may find that a form of capital or operating lease is best, or that a TRAC lease that enables you to finance a truck or trailer to a preset residual  at the end of the term, may help you better manage your cash flow and residual exposure. No matter what option works best for that vehicle, a reputable financial services company that specializes in the trucking industry can provide options that might not otherwise be available because it partners with some of the largest banks in the country to deliver a variety of low-cost funding options.  One type of lease does not fit all fleets.

When evaluating true life cycle operating costs, remember to keep three small words in mind…buy, use, and sell. These three stages of a commercial truck’s life are inextricably linked and should always be viewed together when making any calculations that will affect a fleet’s profitability.

About the Author: Patrick Gaskins is Vice President of Financial Services with AmeriQuest Transportation Services.


Comments (1):

  1. Pingback: How much does a truck really cost? | Successful Dealer

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>