How to Evaluate Life-Cycle Costs


Chapter 9 -
Disposal: The end of the road

Selling a vehicle carries a liability: The vehicle must be usable to get the best sale price. If the vehicle is defective, it might be wiser to salvage it than to sell it. The vehicle should pass state inspection and have a published warranty. If there is no published warranty, you, as the seller, are liable for an implied warranty that most likely would be broader than you can support. Make a detailed inspection of the vehicle, take pictures and note its condition.

You can dispose of the vehicle through a retail, auction, trade-in or wholesale process, depending on the market position at the time of sale. Timing of replacements should take into consideration new model introductions, because existing models lose their resale value as new models are introduced.

For the most part, equipment values range from wholesale at the low end to retail at the high end:

  • Wholesale value is the value a dealer is willing to pay on a speculative basis. In other words, the dealer buys your equipment without knowing who will eventually purchase it or what price it will bring. The dealer takes the risk that he will find a buyer and make a profitable sale. Wholesale value, therefore, is the lowest value, because the dealer wants to minimize risks.
  • Retail value is the amount that an end user will pay the dealer for the unit. In a retail sale, the dealer may provide a warranty and financing. Dealer margins can vary widely from deal to deal, but dealers typically attempt to make a gross margin of 20 to 30 percent over wholesale value.

Typically, trucking companies are not equipped to obtain retail values for their equipment. Nevertheless, there are things you can do to narrow the spread between wholesale and retail value. The keys to selling vehicles are patience and making the greatest number of potential buyers aware of their availability. Running an advertisement in a trade magazine or listing your vehicle on an online used truck locating service, such as the service on eTrucker.com, can generate a great deal of interest. Dealers that know about your equipment can look for someone willing to buy it. When a dealer finds a buyer and knows what that buyer will pay, he can negotiate to purchase the equipment from you. Dealers can work on much narrower margins, because the risk has been taken out of the deal.

Always clean and detail equipment before putting it up for sale. Having a detailed maintenance history on the major components is helpful. Be sure to note any remaining warranty covering any components.

Auctions can be a good way to sell used trucks, particularly if you have a small number to sell. Although many dealers attend auctions, many end users do, too. If your vehicles show well, you may be able to get a good price, and you usually can set a minimum. Auctions charge a fee of approximately 7 to 8 percent of the proceeds.

Spec’ing for residual value
At resale or trade-in, trucks with owner-operator appeal have more value. Dealers are eager to get rigs they can sell to the largest segment of used truck buyers. A fresh paint job, shiny chrome and a powerful engine are no longer enough. Now dealers want trucks with top-of-the-line specs that are well-maintained, have relatively few miles and aren’t too old. That means no more than three years old, less than 400,000 miles and some warranty coverage remaining.

All things being equal, several features will help you get the most out of your truck at resale or on the used truck market. For starters, you need a top-of-the-line tractor spec’d with the following:

  • Texas-style bumpers;
  • Dual external air cleaners;
  • 72-inch high-rise sleeper;
  • Well-appointed interior;
  • Dual cab-mounted exhaust;
  • A 12.7-liter or 14-liter engine with a minimum 460 hp;
  • Jake Brake;
  • 13- to 18-speed transmission;
  • Polished aluminum fuel tanks and bright-finish battery box;
  • Air-slide fifth wheel; and
  • Polished aluminum wheels.

Turnoffs in the used truck market include small, low-rise sleepers; small-block engines with large sleepers; engines that can’t be uprated; vocational interiors; and four-spring suspensions.

Sometimes, weight and fueleconomy penalties for an owner-operator-style truck may be too great for many operations. But in a tight driver market, spec’ing for maximum residual value may be a win-win proposition. By buying a truck that gives you the most payback in the used truck market, you may just get a rig that will draw drivers.

In Summary
You can dispose of vehicles through a retail, auction, trade-in or wholesale process, depending on the market position at the time of sale. The keys to selling vehicles are patience and making the greatest number of potential buyers aware of their availability. Always clean and detail vehicles before putting them up for sale. Having a detailed maintenance history on the major components is helpful. Be sure to note any remaining warranty covering any components.