Whether you own a car, pickup or tractor-trailer, it’s a decision that we all face at some point: Should I just buy a new vehicle or continue to repair my current one?
If you are a trucker and your livelihood depends on that vehicle, the immediacy of the decision can sometimes cloud your judgement, leaving you paying thousands of dollars a month you just can’t afford. With the ever-increasing costs associated with new trucks, many choose to repair their current vehicles. Although, the flip side of that is the increasing cost to repair trucks that are more computerized and in many cases, require a technician specialized in diagnostic repair. Gone are the days of the shade-tree mechanic.
Repair bills, or monthly lease or loan payments can weigh on a small fleet or owner-operator’s budget, so how do they know when it is time to take the plunge and buy new?
Start with understanding the age of your vehicle and the expected cost of repairs based on that age and mileage.
“Once there is an understanding of how much costs change in each age increment, owners can begin making decisions about how long to keep their equipment based on the anticipated maintenance costs,” explained Steve Zerphey, Master Fleet General Manager of Fleet Services.
Consult with experienced professionals who can advise you on what you might expect in terms of repair costs for various age groups of vehicles.
If you are still interested in fixing your current vehicle, consider creating a repair budget so you can put aside funds each month to cover the costs of repairs – consider it a down payment. If you need to make repairs, you have some cash available to help with the cost, maybe even cover the entire cost, without it affecting your regular monthly operations. If the money is never used, you now have a nice down payment for your next vehicle.
Remember to budget for that money each month, though. Simply moving it from one account to another can create cash flow problems when it comes time to pay your other bills.
Should you decide to forgo repairs, your options are varied: you can buy a used truck, lease a new truck, or purchase a new truck.
If you choose to buy a used truck, shop around. It is advisable to plan at least 30 days to find a vehicle. You don’t want to rush this process as this is your office, but at the same time, you want to find what you are looking for. Because used trucks were once new, they come with specific specs. Consider what you want and look for vehicles that match those specs. If you don’t find what you are looking for, start deciding which specs you prefer and which you can skip.
Once you find some vehicles to look at, Smart Trucking has a few tips:
- Know the engine history and look at a list of its scheduled maintenance.
- Ask for copies of the maintenance records
- How often was the oil changed?
- Who maintained the truck mechanically?
- What hasn’t yet been replaced, that is due for replacing in the near future, such as transmission, rear ends
- Measure the tire tread depth. Do the tires have a reasonable life left in them?
- Have oil samples from the engine, transmission and rear ends been analyzed?
- Check the suspension, wiring, rear ends, complete drive train, transmission
- What types of problems did engines of this type typically suffer from and when? Check the history of the specific engine.
There is also a subscription service called Rig Dig that tracks commercial vehicle histories similar to what CarFax does for automobiles that can be helpful.
Buying used does have its pitfalls. First is the fact that unless you have excess cash on hand, you are likely financing the vehicle. That means a monthly payment. There is also unknown maintenance and repairs. Despite your best due diligence, you can’t possible know for certain what problems that truck may have in the months or years ahead. Because of that, many buyers choose to buy new.
The advantages of buying new are many and include the fact that you are getting the best technology currently available. Equipped with aerodynamic packages and driven to optimize fuel usage, many new trucks are capable of routinely getting 8.5 to 9.5 mpg. With the national average at about 6.9 mpg, that can add up to a significant savings over the cost of a year.
Also, with a new truck, you shouldn’t have many repair bills. Even with a monthly payment, it now becomes as close to a fixed cost as you can get, making budgeting easier.
If you make the decision to go new, your options are to lease or buy. If you lease, you pay a fixed amount each month and at the end of the lease term, depending on the specific language, you may have the option to buy the vehicle outright or trade it in for another. Leases can be handled by a lease provider or some carriers will offer lease options for contractors.
If you choose to bypass a lease and purchase a vehicle instead, it’s a pretty straightforward process and will involve a loan in most cases. The advantages is that the vehicle is yours.
Whether you lease or buy, you will usually have the opportunity to spec the vehicle to your liking – another advantage over going the used-truck route.
According to Penske Truck Leasing, advantages of leasing a vehicle include little to no upfront costs, shorter trade cycles allowing you to take advantage of new technologies as they emerge on the market, and the opportunity to acquire a vehicle under a “full-service lease,” which will include all maintenance of the vehicle, eliminating an area of potential cost.
Triumph Business Capital notes that leasing does have a few downsides. Some leases, it says, could charge you additional for wear and tear of the vehicle and there can be other expenses such as security deposits, acquisition fees and more.
“In short, leasing provides flexible options, but sometimes that flexibility can come back to hurt you, as having an outstanding lease on a vehicle directly impacts your company’s cash flow, taxes and ability to replace or increase your fleet,” Triumph notes in a blog posting.
Buying a new vehicle can offer additional options when it comes to financing. There are many types of loans available that can be crafted to your specific situation, but perhaps most importantly, every time you make a payment on that truck, you gain more equity. At the loan’s conclusion, that vehicle is yours.
Whether you choose to fix, buy used, lease or own, your decision will impact your business’ cash flow. Some prefer to limit the risk of the unknown, and for those people, buying or leasing new with set monthly payments will be the preferred path. Others will choose to buy a used truck or continue to repair their own and take their chances. There is no right path to choose, but whichever one is chosen, you need to make sure you have a budget in place that addresses how your money will be spent.
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