Lease or Buy Used?

Fleet Management, Fleet Management, Leasing, Rental, Vehicle Sales
March 15, 2012

The same “what-if” calculations used to decide whether to lease trucks instead of buying new trucks hold true for buying used vehicles as well, according to consultant Timothy Brady, a retired owner-operator who also runs the website www.truckersu.com.

“It’s a dollars-and-cents decision to replace a truck with a new, used or leased vehicle,” he says. Brady notes that there are many facets to take into consideration when performing your analysis.

The most accurate way to begin is to track your costs monthly, making sure to include maintenance, repairs and tires. Truckers also should check diesel mileage as it can change as the truck ages and the price of fuel fluctuates.

Some riles of thumb for figuring costs before actually recording figures can help guide your decision. A late-model truck might cost 15¢ a mile for maintenance and repairs, while an older vehicle may cost 20¢ to 30¢. As for fuel costs, newer vehicles get better mileage than older ones, but 65¢ a mile is a workable number with which to start.

There are also other numbers to keep in mind: The note on a good used truck might run about $1,500 a month and downtime can be, conservatively, $865 a day.

“To me, downtime is the most important operating factor because you’re spending money and you’re not making money when you truck is in for repair,” says Brady. Obviously, the older your truck, the more time it will spend in the shop eating away at profits.

“If I were to get back into the trucking business today, there is no question that I would lease a truck and not buy – either new or used,” he explains. “If I get the right kind of lease, and my truck breaks down on the road, the leasing company should tow my truck to the shop and give me a replacement. It may not be the same year truck, but I’m back on the road and making money.

“I might buy trailers,” he continues, “but I would never buy trucks.”

Brady notes that with newer vehicles often getting better fuel mileage, he would want to change out trucks every three to four years to take advantage of fuel savings. Leasing would allow him to do this.

There is one exception to leasing, however. “If I’m doing local shorthaul containers and I have a working ship, then I’m going to look at buying used trucks. If a truck breaks down, I can quickly tow it to the shop and replace it with another beat-up truck. I’m not 500 miles away. Why do you think you see so many beat-up trucks at the Mexican border? It makes sense to run these old trucks into the ground.”

So what is Brady’s advice for fleets deciding on whether to lease or buy used? “Do your analysis, and nine times out of 10 the economic decision will be to lease.”

Copyright 2012 Fleet Owner. Reprinted with permission. All rights reserved.
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