When Fleets Need to Buy, Lease, and Sell in an Ever-Changing Market

The modern trucking industry has made it vitally important for fleets to know the best times to buy and sell their assets.

Right now, experts are saying asset management being aligned with the ever-changing industry is of the utmost importance, and this includes everything from proper maintenance to extend the life of equipment, to when and where professionals should dispose of used assets, to the way they plan for capital acquisition of new equipment.

Still, those in the industry have a never-ending list of questions regarding how they can stay on top of the game. When should they buy or lease? How do they know when a truck is too old to be useful? How should a fleet stay up-to-date on the newest technologies?

The biggest issue at hand, still, is the need to keep costs low, which becomes increasingly difficult as new technology is introduced.

Manufacturers show us new models every year, each with their own improvements in comfort, safety, driver assistance, emissions control, and more. As of now, a Class 8 tractor typically exceeds $125,000. As trucks’ technologies increase in sophistication, businesses need more highly-skilled technicians, which are also more costly than ever before.

On top of this, insurance rates for trucking companies tend to follow the trends in the industry. “Rate increases have ranged from single digits to, in some cases, double or worse depending on these factors,” vice president of Lockton Cos.’ transportation practice, Todd Reiser, said.

Shippers are now working to stay as environmentally conscious as possible, while fleets are taking advantage of every tool they can to increase their fuel economy.

In terms of fleet acquisition, Hub Group Trucking has five principles it follows. Those include: safety and reliability, driver appeal, deploying the latest technology, fuel efficiency, and overall ownership cost.

Hub Group’s executive vice president, John Vesco, weighed in. “Safety is first and foremost,” he explained, saying that having the newest equipment and technology supports that value.

Also of high priority–a solid capital expenditure plan and a disposal strategy that take into account all aspects of a fleet’s operating considerations. 

“The best strategy is to establish a ‘continuous build’ [plan],” said Mike Britt, principal of MG Britt Engineering. “This will help the vehicle manufacturer remain consistent with quality, materials, and skill sets.”  

He also added that fleets should schedule the disbursement of new equipment evenly throughout the year at the same times they retire their old assets. “This process will reduce maintenance cost on vehicles ready to retire, keep quality on new builds, and prevent ‘full fleet’ out-of-service situations,” Brit said. He also believes this process will prevent a company “from being bombarded with loads of new equipment to learn all at one time.”

Balancing fleet composition for projected business plans and maintenance costs will also aid in seeing a maximum return on investment, according to Taki Darakos, vice president of vehicle maintenance at Pitt Ohio, which has a fleet of 2,000 tractors and 5,200 trailers.

He also said the acquisition and disposal schedule should always take into account technology improvements. “Drivers want the newest trucks with the newest features and equipment,” Darakos noted. However, he says there is an important balance between getting the most value of an asset’s life and holding onto equipment for too long, which can cause new technology to become obsolete and maintenance costs to exceed boundaries.

On the other hand, new tech does tend to help increase driver retention and recruitment, he said.

Pitt Ohio also doesn’t ever lease equipment. According to Darakos, it’s important for trucking companies to have a substantial mix of new, middle-aged and older assets, so that as trucks come to the end of their life cycles, there are already newer ones to take their places, thus keeping costs consistent.

“When you have a good mix, your [capital expenditure] becomes more predictable and you benefit from an even approach to maintenance expense,” Darkos explained. 

For disposal, Pitt Ohio uses auctions, as it doesn’t operate as a wholesale truck sales company. 

No matter what a company chooses to do in regards to buying and selling, though, consistency is always key.

“Don’t overreact to market swings,” executive vice president of Melton Truck Lines, Robert Ragan, said. Ragan follows many practices he believes to be fundamental: understanding the operating environment, keeping a close eye on business needs and growth plans, and continuing to spec equipment to meet those criteria. He’s also careful to invest in preventative maintenance and to trade or sell his units before warranties expire.

“Know what you paid for it, what you spent [on it] while you owned it, and what you sell it for,” Ragan said. Taking good care of assets while you have them, he says, will give you “a good reputation in the market that will maximize the residual value of your rolling stock when you sell.”