-

As end-of-year planning approaches crunch time, many fleet professionals are evaluating life cycles and deciding when to move older vehicles off the books. It is a good time to consider upgrading. A combination of new tax laws and a stable resale market has created financially favorable conditions for fleet purchasing, which will certainly help organizations looking to keep drivers happy in a competitive economic environment. To optimize vehicle remarketing and replacement for the coming year, or even for the final months of this one, there are several factors to consider whether prioritizing timing, return on investment or both. These considerations also come into play when deciding whether to manage the resale process on your own or to partner with a remarketing specialist. The bottom line is that it is not too late to get those older vehicles off the books this year, and it is never too late for mapping out replacement strategies that take advantage of recent market evolutions.

Why Consider Upgrading Now?

The Tax Cut and Job Creation Act enacted at the end of 2017 not only cut the corporate tax rate down to 21 percent, it also created beneficial new depreciation schedules, doubled the first year bonus depreciation from 50 percent to 100 percent, and also doubled the bonus deduction for newly acquired large vehicles from $500,000 to $1 million. Deduction limits for passenger vehicles and light-duty trucks and vans have increased, and all these new regulations have been expanded to include used equipment, which could have the added benefit of positively impacting the resale market as well. There is an expiration date for the new bonus, however. The 100 percent deduction is in effect through the end of 2022, will decrease by 20 percent each year thereafter and can only be taken the year the equipment is put into service, something to keep in mind when planning out fleet life cycles for the next several years.

 -

Market Timing

When you sell can make a significant difference in potential returns. The spring months tend to be the strongest for used car sales as consumers often plan to make big purchases using tax refunds. At Merchants Fleet Management, we typically recommend clients plan to take delivery of new units in February and March, if possible, so cycled-out vehicles go to market in the spring. Fall months are usually another good time to sell as buyers look to replace vehicles before winter hits. Thisyear, we may see better returns for a longer period as areas hit hard by hurricane damage begin replacing lost equipment.

Trucks in Tulsa and Camrys in California

While the resale market has remained fairly stable after resetting from a high point during the recession, the recent popularity of consumer leasing has increased supply and driven prices down for some categories such as luxury crossovers. But trucks, including vocational vans, work trucks and even light-duty trucks are still doing well. While often the upfit investment for these types of vehicles causes businesses to use them for longer periods of time and accumulate more miles, consumers also tend to be more comfortable purchasing high-mileage vans, trucks and SUVs, particularly in certain parts of the country such as the Midwest. The proliferation of ride-sharing services is also positively impacting the resale market by driving demand for high-economy passenger vehicles. To maximize return, it helps to consider what types of vehicles sell best regionally and balance that out with the associated transportation expenses. There are other fees that also cut into the net, including charges for debranding, repairs and cleaning. Those charges can add up on top of the reseller commission. It isn’t unheard of for a vehicle sold at auction toonly net the fleet owner a tenth of the sale price.

 -

Should You Use a Remarketing Partner?

It may seem too good to be true, but the right partner may actually be able to reduce your remarketing costs associated with transportation and ready-to-sell preparation, and get you a better return. Yes, they will take their cut, but if they want your business, they need to make it awin-win. A good partner will provide the convenience of handling all the logistics, leverage their relationships to reduce fees, and put their market knowledge to work in order to get the best price by optimizing through multiple channels, not just auction houses. Merchants Fleet Management recently expanded its remarketing services to take all of this to the next level. Merchants offers two options for taking the hassle out of selling into the used market, including the nearly unheard-of offer to buy all your vehicles and assume the resale risk themselves.

1. Money Up Front with Merchants’ GuaranteeTrac

  • Merchants pays a guaranteed price up front and assumes all the resale risk.
  • Whereas it can take a month or more to realize proceeds from auction sales, Merchants will pay out in a matter of days.
  • Organizations do not need to be a current Merchants Fleet Management leasing client. Merchants offers this feature to any fleet owner.
  • This is a great option for organizations looking to cash out their vehicles immediately or who have “odd” or unusual units that can be hard to sell, including heavy equipment.

2. Optimize Resale Channels Through Merchants’ OpenTrac

  • More traditional remarketing structure in which Merchants remarkets vehicles on clients’ behalf through a variety of channels — online auctions, onsite auctions, direct-to-driver, wholesale and retail.
  • This may result in a bigger return, but takes longer — an average of 20 days for payout.
  • This involves more market risk; however, Merchants works hard to mitigate this by optimizing channels geographically and through long-standing industry relationships, as well as its own direct-to-consumer auto sales organization.

What Is Right for Your Organization?

Turning over fleets can be challenging and time consuming. Many fleet professionals wear more than one hat and want to be able to focus attention on other core responsibilities. Even if you have traditionally managed remarketing in-house, it is probably worthwhile to explore what a remarketing partner has to offer. Hearing what they have to say can provide useful insights into resale market strategies you may not have considered. If you would like to discuss remarketing options with an expert at Merchants Fleet Management, including selling vehicles before the endof this year, contact (866) 653-2737.

Rocky Petrone is Remarketing Sales Manager at Merchants Fleet Management. Contact him at:rockypetrone@merchantsfleet.com