Are You Holding on to Trucks for Too Long and Spending Too Much?
We have all done it – held on to a tractor for too long, thinking that “I might as well keep it since it’s been paid for”. And most of us have had that exact same truck breakdown as far away from home as possible, and need something like a new transmission or engine because we held on to it for too long. The reason is simple – we can easily see what the interest and depreciation hit on the income statement will be. It’s the unknown of how much the maintenance will be that is the problem. It seems like we never learn and always discount what the repairs will cost.
Some old timers will swear that the 1972 Brockway or 1975 Ford Louisville that they have by the back fence would be less expensive to operate than these “new fangled, computerized things”. They may have been, at one time, but I challenge you to get your local Mack dealer to find parts for that Brockway and get them to you by the next day. Even better, let’s try and find a driver who is willing to run coast to coast in a vehicle that has even fewer creature comforts than the most basic rental truck. While it might sound cool to do once, I would be surprised if you could convince the driver to do it twice. Last year I had the opportunity take an early 1980’s Freightliner for a drive. I had forgotten just how different a mechanical throttle linkage responds compared to today’s trucks. And then there was the noise – you really don’t appreciate today’s sound insulation until you drive something that barely has any. Looking for the fridge or microwave – sorry, it’s not there. Looking to stand up in the bunk – you had better be short.
You might be asking why this is relevant. Compare a 2018 model to a similar 2012 model, and you can see how they have gotten better. Things like automated transmissions, idling reduction technologies that still allow for a full hotel load on the electrical and HVAC systems either were not available, or were still in their infancy and subsequently unreliable. I had one driver threaten to quit on me once because his bunk heater would only run for about 5 or 6 hours a night and he was tired of waking up in upstate New York with ice in his hair. It was incidents like these that gave a lot of us a hesitation on getting newer vehicles.
So, what don’t we want to hold on to our vehicles longer? As I have hinted, driver satisfaction tends to go up when they get a newer vehicle with more creature comforts than their old one. However, there is little that dissatisfies a driver more than constantly sitting at the side of the road waiting for either a service vehicle or a tow truck because he broke down “yet again”. Whatever you pay for a layover is less than what they could have made rolling down the road. Throw in the additional costs of having an outside repair shop and you are probably looking at a large invoice.
So that’s what a breakdown will cost you, but what about the work that gets done in your own shops? Fleet Advantage recently put out a report that estimates that a tractor requires approximately 2.5 hours a month to maintain while a three-year-old one requires 4.5 hours a month. A simple guide that many people use is to assume that a technician costs you a dollar a minute. So, in dollar terms, the newer truck cost you $150 per month while the older one costs you $270 per month (and that will only go up as the vehicle ages). To put it another way, you will need almost double the number of mechanics for an average fleet age of three years compared to an average age of only one year. Keep in mind that this only includes the mechanics on the floor, it doesn’t address the additional administration costs of having more bodies in the shop. It also does not look at the increased inventory and parts costs that are needed to keep an older vehicle running. For trucks that are only a year old, you are mostly stocking preventative maintenance items like filters, bulbs and fluids. You will still be stocking those items with an older vehicle, but you will also need to stock brake shoes, drums, various exhaust system sensors and other higher priced items. The inventory carrying costs are something that many people do not account for when looking at what it costs to keep an older truck.
The Fleet Advantage report suggests that by reducing your vehicle lifecycle from 5 years to 3 years, the expected average maintenance savings would be $17,150. Reduce it to 3 years from 7 years and those savings go up to $42,830 per unit (to download a copy of the report click here). Your numbers may be slightly different, but the trend will be the same – the annual maintenance costs will go up each additional year that you own that vehicle.
One other place where you could come out ahead concerns the current value of your used truck on today’s market, compared to what you typically use for a residual value. In a strong used truck market like we have seen recently, you may see a significant gain (remember to check your financing contracts to ensure that there are no fees or penalties that you are not accounting for). Yes, the capital cost of a new tractor is higher than the one you are replacing but the residual value should also be higher down the road.
Finally, look at what your preventative maintenance program covers and consider if it is catching everything that it should be within your shop. Look at how often you have on the road repairs and what they are. Is there a pattern, specifically are the same components failing at a similar mileage? If you are seeing a pattern, add it as a pm program and catch them in your shop before they fail. If not, then try to determine the average mileage to failure and use that as a guide. Yes, your in-shop costs will rise but there should be a corresponding reduction in breakdowns that cost more than just the repair bill.
Regardless of what method you decide to utilize to reduce your costs, make sure that you are making sell/keep decisions on a total cost of ownership basis, not just on one or two factors. Looking at all costs as a system instead of isolation will result in determining the optimal time to replace a vehicle with objective data, not just a “gut feel”. You may just find that you are spending more in additional maintenance than you would in buying a newer vehicle.