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Tips for Reducing Truck Acquisition Costs

September 2017, Work Truck - Cover Story

by Lauren Fletcher - Also by this author

One goal truck fleet managers often have on their perennial “to-do” list is to continuously reduce their acquisition costs.

The initial monetary outlay to purchase new vehicles can be hundreds of thousands of dollars for larger fleets, or those with medium- and heavy-duty trucks or specialty equipment and upfits.

Finding ways to continue reducing acquisition costs, while ensuring the fleet can complete its job mission, is a daunting task.

Smart fleet managers take this as a challenge and stay focused, constantly looking for even small changes that can have big results.

Image from Getty Images
Image from Getty Images

Over-Spec’ing to Higher Acquisition Costs

The most common way that fleet managers drive up their acquisition costs is by over-spec’ing their vehicles for the jobs they will need to accomplish.

“Fleet managers who really understand their specific needs and uses of the truck have the best chance with reducing acquisition costs,” said Chris Hoolehan, director of fleet and government sales for GM Fleet. “It’s really easy to over-spec a truck, which leads to unnecessary costs. For example: is four-wheel drive really needed or will two-wheel drive suffice? What’s the needed gross vehicle weight (GVW) for the task at hand?”

One way to be sure you don’t over-spec for the fleet’s needs is by taking the time to fully dissect and review truck specs. Don’t assume the same specs will always fit your fleet needs year over year.

“The first thing fleet managers can do to reduce acquisition costs is review their spec with a fine-tooth comb. Many times there is optional equipment spec’ed that really isn’t needed and can add up very quickly,” said Kurt Swihart, marketing director for Kenworth.

Understanding the job the trucks need to accomplish is necessary to properly spec’ing a truck, reducing a fleet’s overall acquisition costs. One way to be sure you spec properly for the job is to look at routing and loads.

“Look at the route the truck will be driving and determine the best truck for the route and load type. Look at all the factors regarding where the truck will be driving in and looking in selecting a truck that can maneuver the route,” said Brian Tabel, executive director of marketing for Isuzu Commercial Truck of America (ICTA).

And, one reason routing can be extremely important is due to the large cost difference between gasoline and diesel trucks.

“Select the correct powerplant. Trucks that will be driving routes more than 25,000 miles should look at diesel. For routes less than 25,000 miles, gasoline might be the better option,” Tabel added.

When purchasing a fleet of work trucks, it’s important to make solid choices to keep cost down.

“Start by choosing the specs necessary for completing the job and not wasting resources on any excess add-ons,” said Larry Smith, director of fleet sales for Mitsubishi Fuso Truck of America.

Always receive quotes from multiple reputable companies to negotiate your best deal, and consider trade or end-of-life values for the trucks.

“And make sure you are getting the best warranty available at the lowest cost. Not only will that keep your purchase price down, it will ensure long-lasting vehicles for your fleet, with optimum cost of ownership,” Smith said.

Out-of-the-Box Options for Cost Reduction

There are several other ways fleet managers can reduce their overall acquisition costs that may not immediately come to mind. One such option fleets can use is truck leasing.

“Leasing can lower the amount of capital required up-front and takes away some of the responsibility of owning a truck. Because of the increasing interest in leasing, Kenworth has recently launched a program that makes leasing more affordable and includes van body liftgate upfits,” noted Swihart of Kenworth.

Financing options can also help reduce overall acquisition costs.

“Fleet managers can work with our sales representatives to create a finance program tailored to their business’ unique need, such as skip payments for seasonality. The specifics of the program developed for your fleet may help reduce both acquisition and operational costs. Another option is setting up a line of credit before you need it, which may save time and can free up operating lines of credit for normal business expenses,” said Kary Schaefer, general manager, marketing and strategy for Daimler Trucks North America.

Leased and finance equipment can reduce a fleet’s trade or turnover cycle, which, according to Schaefer, may decrease expenses associated with fleet upkeep.

Cost negotiations are another area that can result in large reductions in acquisition costs.

Mercury Associates, a fleet consulting firm, recommended that factory-paid dealer delivery fees should also be negotiated along with receipt of national fleet or retail incentives (whichever is lower). Once a transparent net price is established, negotiate a reasonable flat fee of profit for the dealer.

Also, look for a partner who can help with all parts of the process.

“Work with lenders who can finance the truck, body, and additional equipment into one package to reduce time and paperwork,” Schaefer added.

Telematics use can also impact acquisition costs. System installation can add up, and several providers have teamed up with automakers to provide already-installed telematics solutions.

“Fleet managers can also look at which needed features are standard, optional, or need to be purchased in the aftermarket. For example, fleet managers who use telematics services would be attracted to embedded telematics hardware, which comes standard, rather than having to buy and install aftermarket hardware,” said Hoolehan of GM Fleet.

Another area to save costs, according to Swihart, is at the upfitter.

“Sometimes saving $1 on the vehicle purchase price can cost $5 at the upfitter. For example, Kenworth offers an optional custom frame layout that allows the fleet manager/body builder to spec exactly where they want frame-mounted components to be located on their truck. This means no moving air tanks, fuel tanks, batteries, etc., after the truck has already been built. We strongly encourage the fleet manager or dealer to work closely with the body company to make sure the spec is correct the first time,” Swihart said.

Finally, one area where a fleet can reduce acquisition costs is by reducing the fleet’s size. Replacement cycling needs to change as fleet needs and truck use changes.

Take a look at your fleet and check to ensure that each vehicle is being used at its utmost capacity. If there are vehicles in your fleet that are not used fully, or areas where one truck may be able to do the job of two under used vehicles, take this into consideration during the next acquisition cycle.

Keep an Eye on the Big Picture

It’s important to remember that acquisition costs are only a part of the fleet budget; total cost of ownership should also be considered.

“Look at all the cost and run a total cost of ownership calculator to determine what the truck will cost for the life of the truck,” said Tabel of ICTA.

Hoolehan of GM Fleet agreed. “Overall, acquisition cost is important but it’s only one portion of the equation when it comes to budgeting for fleets. A truck might have a slightly higher acquisition cost but can be a value throughout the ownership of the vehicle due to maintenance, operating, and warranty costs; along with fuel economy and residual value,” he said. 

10 Tips When Selecting a Truck

One of the most important aspects of reducing a fleet’s acquisition costs, and the one that can result in the largest savings, is ensuring you are selecting the right trucks in the first place.

Tips to select the right truck for your fleet needs include:

1. Know the job at hand. Completely understand the job duties the truck will be required to handle. This will ensure you choose a vehicle that isn’t underpowered or undersized for your fleet’s needs.

“The more a customer can tell the dealer about their operations, how they use their vehicles and what features are most important to them, the more a dealer can suggest the right specs that will be the most beneficial to their business,” said Kary Schaefer, general manager, marketing and strategy for Daimler Trucks North America.

Remember to keep body equipment needs, driver comfort, and safe vehicle operation in mind.

2. Adjust for changing needs. Redo the selection and specification process as often as possible. A previous upfit may be lacking needed items, such as shelving or storage, resulting in additional downtime while the truck is configured to a fleet’s specific needs. Take a look at new providers, technology, and upfitting options that may not have been available during your last truck selection.

3. Avoid repeating past mistakes. Talk to drivers about what works and what doesn’t from the last truck spec. Take notes throughout the year about any issues you see pop up often during ride-alongs, such as difficulty accessing equipment, securely storing tools, etc., that could be addressed during the next purchase cycle.

4. Don’t forget total cost of ownership (TCO). Fleet managers are recommended to take TCO into consideration. This impacts your budgets this year and through the life of the vehicle.

“Total cost of ownership includes initial purchase price and costs associated with maintaining and operating the truck as well as residual value, fuel economy and warranty costs,” said Chris Hoolehan, director of fleet and government sales for GM Fleet.

5. Remember the powertrain. In addition upfitting needs, changes in powertrain options mean a V-6 engine may do the job of the V-8 that’s always been spec’ed in the past, saving money on acquisition costs and fuel, among others.

6. Spec for payload. Make sure the truck’s gross vehicle weight (GVW) is appropriate for any hauling needs or for the weight of the payload your trucks will need to carry.

7. Don’t forget about resale. When selecting a truck, keep resale values in mind. Trucks with higher initial acquisition costs don’t always equal a higher resale value. Keep an eye on truck values and include estimated resale value in your calculations. Keep the truck’s “second life” in mind, such as making sure that it can be converted to another application. Another important factor is whether or not to include power take-off (PTO). While it may not be needed for your application, PTO can make a truck far more attractive in the resale market.

8. Make sure to get the right truck for the right job. Work closely with your OEM to leverage their expertise.

“If you don’t spec correctly, you could be paying unnecessary costs for an over-spec’ed truck; while an under-spec’ed truck may not be functional for your specific needs,” said Hoolehan of GM Fleet.

9. Keep safety top-of-mind. When selecting a truck, don’t skimp on safety. Many safety features that used to be optional are becoming standard, and the small cost for optional equipment can save thousands, even a life, in a crash or other incident. Check out crash-test and safety ratings, if applicable, to help make a safe truck purchase decision.

10. Ergonomics is important. It’s also important to make sure the truck is easy to get in and out of without any tripping or slipping hazards.

“A truck that is both comfortable and easy for a driver to operate can make the truck much safer on the road,” said Kurt Swihart, marketing director for Kenworth.

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