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Spec’ing Light- and Medium-Duty Trucks to Maximize Resale Values

May 1, 2016, by Mike Antich - Also by this author

Despite the application, fleets are in the business of manufacturing used vehicles. “The day the new truck is built is the day the used truck is built,” said Ed Burke, general manager for VIP Truck Center in Livonia, Mich.

How you spec a truck has a direct bearing on its future resale. Here are the some of the do's and don’ts in truck spec’ing that will impact resale values.

Do's and Don’ts of Spec’ing

DON’T spec a manual transmission. There are fewer qualified drivers today capable of driving a manual transmission than in the past. Automatic transmissions are required by most companies when selecting a vehicle, which makes automatics more desirable from a resale perspective. In addition to resale value, an automatic transmission assists in driver acquisition, retention, lower maintenance costs, and more uptime.

DO order locking differential when buying a 4x4 truck. If you do not order locking differential you might as well buy a two-wheel-drive truck since a four-wheel-drive truck without this option can find it difficult to operate in an off-road environment. The purpose of the locking differential is to always have at least one wheel on each axle with traction to move off of a rock or log in an off-road environment. Power gets split to the wheel with traction. If there is no locking differential, power goes to the spinning wheel so you just keep spinning. Why buy a $40,000-$50,000 four-wheel-drive truck and omit a $300 option that improves the performance and capability?

DO include the power take-off (PTO) provision. Even if there’s no need for a PTO for the truck’s initial use, the availability of the PTO provision will make the truck more attractive to buyers in the secondary market because it saves the future owner from having to pay to add the provision. “Not being PTO-ready, which is a relatively inexpensive option when ordering a truck, can stop a sale cold if the buyer needs a PTO,” said Ken Gillies, manager – truck excellence, Midwest Region for Element Fleet.

DON’T spec diesel engines under 230 hp. The higher ratings can be used for a wider range of applications, expanding the potential pool of customers on the secondary market. The key is determining the horsepower/torque “sweet spot” where the truck offers sufficient power for its initial duty cycle while increasing possibilities for future resale, without paying too much up front.

DON’T spec unusual exterior colors. Some fleets prefer to have their vehicles “stand out” and may have elaborate paint schemes or unusual colors. While this may be important in meeting a corporate image or marketing campaign, these units require additional expense to be “de-identified,” further chipping away at a net resale return. Other, non-standard colors will negatively impact the initial sale price of a unit. If possible, stay with white as a base color. You can use a wrap for any branding scheme instead of using a non-traditional color. “The typical buyer is looking to put the vehicle into service quickly; the need to repaint it will quickly stop a sale,” said Gillies.

DON’T under-spec a truck. While buying minimal horsepower and low-torque engines and least expensive transmissions may get your job done, will this be desirable to the next owner? “Likewise, don’t acquire the lowest acceptable axle weight ratings and GVWR. This will limit the number of buyers who might consider buying the used unit. Similarly, don’t spec light-duty frame rails, wheels, and tires, which also affect how a used unit sells,” said John Brewington, president of Brewington & Company.

DON’T over-spec a truck. Over-spec’ing impacts resale from the standpoint of adding weight. Many companies either over-spec to handle more payload weight than necessary, which costs more upfront and is not necessarily recouped at resale. “If your calculations for GVW say you need 24,000 pound and you add a 20% (reserve GVW), you are at 28,800 pounds. That’s great; however, try selling a truck that will require a driver with a CDL to drive it. This will increase your costs and the next owner’s costs. In fact, you will probably get less for a 28,000-pound truck than a 26,000-pound truck,” said Burke.

DON’T fall prey to the false economies of re-using upfit components. “When equipment or upfitting is removed from the old vehicle (with the objective of eliminating the need to purchase a new equipment) there is an immediate diminishment of the old vehicle’s resale value due to rust, bold holes, wear marks, etc.,” said J.J. Keig, corporate fleet manager for CBRE. “Also, by retaining the old components, it will prevent a fleet from taking advantage of newer and more refined products.”

DON’T buy units with minimal driver comforts. “Skimping on driver amenities will lower the resale price, such as spec’ing bare-bone units without suspension seats, Bluetooth, automatic or automated transmissions, “economy” grade interior, no radio, or power windows and locks, or even no air conditioning,” said Brewington.

Balance Between Resale & Application

Trucks are ultimately tools of a trade and the chassis merely provides mobility and power to operate equipment. When trucks are built to perform at their optimal performance, specifically in the areas of reliability, fuel economy, and driving ­experience, there will always be a demand and a market to resell these trucks. While resale is a very important lifecycle consideration, the most important part of a lifecycle calculation for any type of truck, especially medium-duty applications, is building the right truck for the intended job function.

There are distinctive differences between the secondary markets for Class 3-5, and Class 6-7 box trucks. For the most part, the Class 3-5 chassis specification options are typically limited, with any customization limited to the body design.

Ultimately, mileage and general condition will likely play the greatest role in determining desirability and resale value.

Let me know what you think.

[email protected]

Comments

  1. 1. Tim King [ May 05, 2016 @ 02:07PM ]

    Excellent article.

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Mike Antich

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Mike has covered fleet management and remarketing for more than 20 years and entered the Fleet Hall of Fame in 2010.

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