Trading upward does not necessarily have to entail purchasing a newly manufactured truck right off the factory lines. Sometimes, a swap can be as easy as getting the same make and model, just increasing the year.
Some thrifty companies that would rather own their trucks than lease will own used trucks until they are ready to upgrade to one that is newer, but still used. The time between used trucks and upgrading is called a trade cycle. But when is the best time to start a new trade cycle, and swap a clunker for an almost-new, used commercial vehicle?
Factors to Consider
As of the writing of this article, the trucking industry is on fire. Freight rates are climbing, more freight is being hauled, job positions are being filled, and new trucks and trailers are flying off of their lots.
In the first half of 2020, the transportation industry was not very healthy. Aside from the initial run on supplies such as toilet paper, consumers shifted their spending to more digital goods. Now with people acclimating to COVID-19, the demand for solid objects such as furniture is higher than perhaps ever.
With trucking companies shutting down in 2019 and early 2020, a surplus of used commercial vehicles of all types are on the market. A higher supply tends to bring selling prices down, but only for as long as the surplus exists. With the fast purchasing of newer trucks, it is only a matter of time before the used trucks are claimed as well.
We at TopMark Funding believe now, the final quarter of 2020, is the opportune time to upgrade to a newer tractor.
Regulations and technological advancements lead to higher fuel efficiency as the year of a truck model increases. There are many factors that could drive the efficiency increase, a brief list of examples:
- A more efficient engine under the hood.
- A sleek, more aerodynamic shape.
- Regenerative braking.
- Less use of energy for more auxiliary components such as headlights and radio.
Beyond standard diesel trucks, another thing to consider is electric semi trucks. Currently there are not many if any in mass production, so once they hit the market, it will take at least a year for used electric big rigs to hit the market. The fuel savings in electricity are sure to be great, but probably not enough alone to justify holding onto a very old truck in hopes of an electric one coming around soon.
It is common sense: older trucks are more likely to break down. If you find yourself spending thousands of dollars replacing and repairing parts of your truck, it may be worth the price of purchase in full through savings in money, time, and headaches to upgrade.
Continuing from maintenance, if the warranty of your truck is still in effect, the manufacturer can still be on the hook for untimely breakdown of certain parts. If the warranty is expired, that riskis shouldered onto the truck owner, which will almost certainly lead to raised maintenance costs in the future.
Used truck dealerships may offer their own warranties if the manufacturer’s has either expired or been voided. Make sure to research the warranty conditions before purchasing a new-to-you vehicle.
The name of the game in business is to drive a profit. If the freight market does not offer a high enough rate per mile to recoup the costs of the machine, what is the point?
Fortunately, in the current scenario we are in, freight rates for all categories are climbing. To say the very least, business is good.
Newer commercial vehicles have better safety features. Relatively newer trucks that have been used may be especially safe, as they can have new technological features such as collision detection and mitigation that older equipment from a dozen years ago may not have. If you see a used truck with a safety feature that you think might just save your life, it may be the best argument for starting a new trade cycle.
Truck Financing Costs
When it comes to getting financing, no two scenarios are quite alike. There are many different factors in getting financing, such as the year of the truck, the credit of the loanee, and much more. As a general rule of thumb, though, a newer truck has a better chance of getting financed than an older truck. Lenders prefer to put their money behind a 2018 truck over a 2011 truck, out of fear that wear and tear over those seven years can increase the likelihood of breakdown.
Whatever your scenario for used (or new) semi-truck financing, you can count on TopMark Funding to work with you to get you the best chance of getting financed! Read on after the article for more information about how to apply.
The older the machine and the higher the mileage, the lower value it will be. This is mostly due the maintenance costs up above. After all, older parts are more likely to break and therefore people are not interested in buying them for much.
With depreciation you have two options. You can either trade in a truck when it still has residual value to get a discount on upgrading, or if your truck is not worth much on trade in, you can drive it into the ground, when it mathematically makes no more sense to keep on driving it due to the ongoing costs. Nobody knows your position better than you do, so it is up to you to make this judgement call.
Here is a factor not often considered: newer 18-wheelers are simply more fun. They have all sorts of quality-of-life improvements such as finer tuning climate control, surround sound radio, phone integration, wi-fi in the sleeper berth, and much more.
None of these are as important as the quality of the parts, naturally, but they are still things to consider when jumping ahead a few years.
When it comes to the trucking business, the trucks employed are the second most important asset to the business, behind the people who drive them. While there may be sentimental value in holding onto your truck for as long as you can, there will undoubtedly come a time to let go. Whenever that time comes, whether it be now or in another decade, make sure to approach the purchasing decision with copious amounts of research to know which used semi-truck is the right purchase for your business.
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ABOUT TOPMARK FUNDING
TopMark Funding is a top-rated semi-truck financing and equipment financing company located in Roseville, CA. We specialize in commercial trucking and heavy equipment. Our mission is to become your long-term financial partner by helping you grow your trucking business and fleet.
We’re not here for the short-term, we’re on the long-haul with you!
Learn more about Semi-Truck Financing
Fill out the contact form or give us a call at (866) 627-6644. One of our truck financing specialists will contact you as soon as possible to go over your truck lease needs and learn more about you and your business financing goals.