Knowing what your tractors,trucks and trailers are worth is a critical element in successfully running any kind of fleet. For some advice on how to get the clearest picture of your fleet’s worth, Fleet Owner turned to businesses whose jobs are to create accurate equipment valuations—three that provide truck and trailer financing through leasing and one that helps its small-fleet franchisees manage their equipment investments.
Probably the most important element is creating or identifying a deep, accurate database. “In the past 10 years, we’ve sold over 26,000 used trucks, which has provided us a database that plays a key role in accurately predicting future resale values,” says Paccar Financial’s Jake Civitts. Confidence in those valuations allows Paccar Financial to create competitive fair market leases despite the generally higher initial costs of Paccarand trucks.
“We capitalize on that…We can offer better monthly payments because historical resale values support putting more value on the vehicle at the end of the lease,” he says.
When it comes to value at resale, “More is still better,” Civitts says. “More horsepower, more capacity, more gauges, more driver amenities. We encourage specs that will add value to a vehicle at resale. In the case of a lease, your lowest priced truck is hardly ever your lowest payment truck, and some features that can reduce operating costs, such as single wide base tires, are not as popular in the secondary market.”
Understanding residual value is critical because buy versus lease decisions are made on that analysis, says John Flynn, president and CEO of Fleet Advantage, a finance lessor.
To get that accurate residual, a fleet needs to start at the beginning of the acquisition process, not when it comes time to dispose of the equipment. Most fleet managers understand that getting the right trade cycle is key to optimizing total cost of ownership, but all too often they overlook examining whether they paid the right initial price for the vehicle, Flynn suggests.
“Specs also have a huge impact on valuations,” he says. Typically a fleet will initially spec a truck or tractor for its applications and then try to dispose of it at the highest price it can get. But if, for example, an over-the-road fleet specs automated mechanical transmissions with an access plate for a PTO even though it doesn’t use PTOs, that truck might be worth $5,000 to $10,000 more because it would be attractive to oil field service fleets that require them, Flynn points out.
Sometimes a new lease agreement involves acquiring the fleet’s old equipment, either for lease-back or disposal. Obviously, getting the valuation right is critical. Fleet Advantage not only does a thorough inspection of each vehicle complete with pictures, but it will also download data from the engine controls so it can look beyond mileage to engine hours accumulated by idling or PTO operations.
Financing everything from golf carts to heavy trucks, GE Capital Fleet Services has fine-tuned the valuation process over the years to such an extent that other firms also outsource their own valuation and equipment remarketing to them.