Specifying Class 8 Trucks for Residual Value

Specifying and designing your Class 8 trucks for maximum fuel economy, low maintenance and strong resale values can be like walking on a tight-rope.  Most fleet operators do business with a local truck dealer.  That dealer wants to keep the fleet manager happy and he knows that a happy driver makes for a happy fleet manager.  Therefore, the driver has some influence over the spec, including its powertrain and options.  Drivers want to spec a truck for high performance and appearance rather than for fuel efficiency and improved resale value.  This conflicts with business models where management requires safe equipment with low operating costs and high resale values. A strong desire to maximize fuel economy is ingrained in both the first buyer and the secondary buyer because fuel represents 70% of a truck’s operating cost.  Based on 100,000 MPY and $3.50 gallon, a 0.2 MPG improvement is worth about $1,500 year.  If you specify a truck to satisfy driver performance and preferences, it will result in excessive fuel burn and unnecessary costs that do not add to its resale value. 

The larger corporate purchase decision is even more riddled with complexities. The purchasing department wants the lowest “up front” price.  After all, their mission is to “buy right”.  The finance group’s goal is to take a long depreciation period to lower the fixed monthly charge.  Virtually no one other than a smart fleet manager is orchestrating an economic method of managing the depreciation equation by using the correct formula: upfront cost, minus future resale divided by the number of months in service. 

Truck Cost $120,000 / 90,000 MPY

 

COST

USE TERM

RESIDUAL VALUE

MONTHLY FIXED COST

Example A

100%

72 months

23%

1.07% / $1,284

 

 

 

 

 

Example B

100%

62 months

35%

1.04% / $1,248

 

 

 

 

$36 monthly saving

Example B - The 5 year old vehicle has 465,000 miles.  (Anything under 500,000 miles has a $3,000 - $5,000 premium in resale value.)

Example A – The 6 year old vehicle has 540,000 miles.  It is one year older with over 500,000 miles with a respectively lower residual

Priorities to enhance residual value: (1) maximize fuel economy (2) complement specs with aluminum wheels and some other resale enhancements (3) cycle the vehicle out of service when mileage is low and residuals can be maximized.  Note: a 5% gain in residual value equal to $100 month during its holding period.

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