HOW MUCH IS YOUR TRUCK COSTING YOU? UNDERSTANDING TOTAL COST OF OWNERSHIP

So, you’re about to buy a truck.

If it’s your first time, it’s exciting that your business is ready to get serious, but as with any investment, you want to make sure that you are going to get the most from this venture before you sign on the line and wheel your new rig out for its first gig.

We’re talking about Total Cost of Ownership (TCO).

If you’re a fleet owner, understanding the true extent of your investment has always been critical to the successful and profitable operation of your business. Making sure that you have the right information at your fingertips to really drill down into the various cost areas is key as this report by Ernst and Young recently found. Once again – there can be a yawning gap between perception and reality.

Count the costs

Cost of ownership is an accounting term used to describe the method for calculating the spread of costs of an asset over the span of several years. In layman’s terms, it’s how much your truck’s going to cost you while you own it.

This is important because it could mean that scrimping on quality to save money now, could end up costing you more in the long run.

When choosing a truck, you’re also choosing the lifeblood of your business, so ensuring that your business decision isn’t going to leave you in the lurch is the most important part. The mere mention of downtime can send a shudder through any small fleet.

Here is our quick guide to Operating Costs/Expenditure to consider during your next purchase:

  • Fuel: A cheaper truck brand can cost more on fuel because it may not have the level of engineering required to increase fuel efficiency and reliability. Talking to your dealership about fuel economy can save you huge amounts in the battle of the bowser.
  •  Servicing and maintenance: When choosing a new truck, ask your dealership about servicing costs and service agreements, as servicing and maintenance can account for the majority of your TCO after your sixth year of ownership. Remember, a truck brand doesn’t earn its reputation just through the quality of its trucks, but also the reliability and experience of its highly-skilled technicians.
  • Warranty and repair: When calculating the cost of a new truck, remember to factor in not just the length of the warranty, but what the warranty includes.
  • Parts: The cost of replacement parts is another factor that can influence your TCO. Established truck manufacturers have the advantage of dedicated parts warehouses and efficient freight methods, which can enable cheaper parts prices for their customers. The quality of those parts is another key aspect. There’s a reason why some brands cost more than others, and it’s usually got to do with reliability and availability
  • Roadside support: This is the hidden-kicker for many owner operators. With a cheaper truck brand, not only can you run a greater risk of break-downs and reliability issues, if you are caught in a tough spot, check to see if they offer you roadside assist. If they don’t, factor the potential cost into your TCO calculations.
  • Finance: Many owner operators choose to finance a truck. Contrary to popular belief it can be as cost effective for small fleets to finance a truck, as buy one outright. When choosing whether to finance or buy outright, remember to factor in whether investing that initial capital elsewhere in the business could result in greater income in the long run.
  • Depreciation: While there are a few brands out there that offer low prices and long warranties, the savings are often offset by poor resale values. This is where reputation becomes important, as a truck brand well-known for its reliability often has significantly higher resale value than those without.
  • Insurance: An expansive, highly-developed range of safety features lowers your chance of accidents, and as a result, your insurance premiums. Insurance premiums are one of the most expensive long-term costs to owners, so check the cost of insuring before buying your truck.

Cut the costs

So now you’ve got all this information, how do you use it?

It’s important to weigh up your options when you purchase a truck. A brand that’s less expensive in the short term, may end up costing you more over its lifespan, whether you’re planning on reselling or not.

Being aware of the factors mentioned in this blog can help you plan for longer-term expenditure, and assess the costs involved in purchasing a truck. For more detailed information, please visit the Australian government’s Truck Buyers Guide.

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