For fleets that run their medium-duties until the “wheels fall off,” resale may not be the highest priority at the time of vehicle purchase. But, for those that intend to replace their trucks every five to seven years or sooner, how a truck is spec’ed has a direct bearing on its future resale, which, if done correctly, will reduce its total lifecycle costs.
Engine Specifications
You should spec diesel engines that can generate more than 230 hp because the higher ratings can be used for a wider range of applications, thereby expanding the potential pool of customers in the secondary market.
With that said, the key is balancing your current needs with future resale considerations. When choosing displacement and horsepower, keep it in perspective. You don’t want to spec engine overkill, such as higher than necessary displacement or horsepower just to get a better residual at the end, because the higher resale could be offset by spending much more on acquisition and fuel than necessary.
Determine the horsepower/torque “sweet spot” where the truck offers sufficient power for its initial duty cycle while increasing your customer pool for future resale, without paying too much up front.
Transmission Implications
“Incorrectly” spec’ing a transmission has enormous implications in the resale market. For instance, avoid spec’ing a manual transmission because this will limit your resale market. There are fewer qualified drivers today capable of driving a manual transmission than in the past. This is why automatic transmissions are acquired by most companies, which makes automatics more desirable from a resale perspective. In addition to resale value, an automatic transmission assists in driver acquisition, retention, lower maintenance costs, and more uptime.
Although a manual transmission offers a substantial cost savings initially, that initial price advantage over an automatic transmission will likely be wiped out at the time of resale since there are fewer qualified drivers today capable of driving a manual transmission.
Also, when determining transmission specifications, remember to include the power take-off (PTO) provision, which is used to provide engine power to truck-mounted equipment, such as cranes, hydraulic hoists used to lift dump bodies, and air compressors. Even if there’s no need for PTO for the truck’s initial use, the availability of the PTO provision will make the truck more attractive in the secondary market because it saves the future owner from having to pay to add the provision after the fact. The PTO is a low-cost option that can reap greater dollars at the time of resale.
Under-Spec’ing Limits Buyers
An important resale consideration is not to under-spec a truck. While buying minimal horsepower and low-torque engines and least expensive transmissions may get your job done, will this be desirable to the next owner? Likewise, don’t acquire the lowest acceptable axle weight ratings and GVWR. This will limit the number of buyers who might consider buying the used unit. Similarly, don’t spec light-duty frame rails, wheels, and tires, which will also limit how a used unit can be utilized
Over-Spec’ing Limits Buyers
Conversely, don’t over-spec a truck. Many companies over-spec trucks to allow them to carry more payload weight or to meet the demands of a severe-duty application. But, in the wholesale market, over-spec’ing impacts resale values because secondary users do not want to buy more truck than they need.
Most trucks today come standard with the necessities for resale and everything else is a choice about spec’ing the truck for a particular job purpose. The biggest spec’ing challenge is not to create a truck that is so specialized that there is little or no interest in the secondary market. Keep the upfit as generic as possible, while still spec’ing to fulfill the needs of your fleet application. This will increase the pool of prospective buyers on the back-end who do not want to spend a lot of additional money having to reconfigure or redesign the upfit when buying a used vehicle.
Admittedly, a vehicle can also be over-spec’ed where the resale isn’t hurt (and it may generate greater dollars) but the initial acquisition cost, lower fuel economy, and overall higher lifecycle costs will make it the wrong choice.
Exterior Color is Important
A good rule of thumb is to avoid spec’ing unusual exterior colors. Typically, white is the common color of most fleet vehicles and, as an exterior color, it conforms to market preference when remarketing a unit.
But, there are exceptions. Some fleets prefer to have their vehicles “stand out” using elaborate paint schemes or unusual colors. While this may be important in meeting a corporate image or reinforcing a marketing campaign, these units require additional expense at the end of their service lives to be “de-identified,” further eroding net resale return. In short, non-standard colors will negatively impact the resale price of a unit. If possible, stay with white as a base color.
An alternative to painting a vehicle in a non-traditional color is to instead use a wrap for a branding scheme. On the flip side, a full-vehicle wrap or complicated graphics will likewise require de-identification, delaying the remarketing of the unit and adding cost that will be deducted from the net resale proceeds to be realized.
If the graphics are particularly difficult to remove, repainting may still be necessary. The typical secondary buyer is looking to put the vehicle into service as quickly as possible and the need to repaint it will inhibit a sale.
Don’t Forget the Interior
The vehicle cabin interior is one of the first things noticed by used-truck buyers whether they’re looking at an over-the-road vehicle or a vocational day cab. Spec’ing bare-bone units by skimping on driver amenities will lower the resale price. Avoid spec’ing an “economy” grade interior, which offers no radio, power windows, or locks. Attempting to control acquisition costs by minimizing driver amenities is being penny-wise, pound foolish.
Resale vs. Application
Ultimately, trucks are tools of a trade and the chassis merely provides the mobility and power to operate or carry equipment. When trucks are built to perform at their optimal performance, specifically in the areas of reliability, fuel economy, and driving experience, there will always be a demand and a market to resell these trucks.
While resale is a very important lifecycle consideration, the most important part of a lifecycle calculation for any type of truck, especially medium-duty applications, is building the right truck for the intended job function. This is an important consideration to remember.
Sometimes choices aren’t good for resale, but are good over the life of the vehicle. In some cases, a vehicle may be under-spec’ed for a very light load or other reasons to achieve better fuel economy and lower initial acquisition cost. At resale time it may be unattractive because it doesn't have enough general use ability, but the loss in resale is more than offset by the fuel savings and lower initial price.
It is necessary to keep things in perspective when making spec’ing decisions. A remarketer may say a certain decision is a mistake, but it may be the best choice for your fleet. For instance, painting trucks unusual colors as corporate branding may make them harder to resell, but you need to weigh that against the money invested in brand image and the advertising spent to reinforce that image and corporate identity. In this case, the overall company goal outweighs any incremental gains you might realize in resale.
While resale is a very important part of the lifecycle analysis, the most important part of the lifecycle for any type of truck, especially medium-duty applications, is building the right truck for the intended job function and which conforms to the corporate mission.
In the final analysis, mileage and general condition will ultimately play the greatest role in determining desirability and resale value.
Let me know what you think.
mike.antich@bobit.com
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