A cost/benefit analysis can add up to huge savings when purchasing new equipment according to one industry veteran.
“Fuel economy is the big decider in spec’ing today,” David Williams, vice president of equipment for Knight Transportation, told CCJ Fall Symposium attendees during a workshop on the 21st Century Buying Cycle. For example, a truck running 110,000 miles per year, that gets 6.3 mpg, will burn $279,365 in fuel at $4 per gallon over a four-year period. “If you improve fuel economy to 6.7 mpg your cost drops to $262,686,” he said, a savings of more than $16,000.
But it’s important to do your own testing to make sure your investment in fuel-saving technology is a wise one, he cautioned.
“We put skirts on all of our trailers and saw an immediate impact,” he said, but with some aero devices, “the difference is statistically insignificant.”
Your type of operation also matters, he said. If you run on highway, aerodynamics are a big deal. If you’re not doing high speeds, you probably need to look at rolling resistance instead. In that case, tire maintenance costs may increase due to softer tires, “so you need to do your own math,” he said.
Knight’s other equipment buying considerations:
• Maintenance and tires. Assuming an average cost per mile of .04 cents, maintenance costs over four years on a truck running 110,000 miles per year will run $17,600. “Reduce maintenance costs to .03 cents per mile and it only drops to $13,200,” Williams said. “It’s still $4,000 but compared to the fuel savings it is less significant.”
• Downtime. “Look at this in terms of lost profit,” Williams said. “You have to define what that number is for your own fleet. Are you willing to take a risk on a certain OEM and risk more downtime?”
• Driver retention. Features such as seats, trim level and APUs can have an impact on drivers, he said, but “it’s not going to solve the problem. You’d be better off looking at things like pay, hometime and communication.”
• Make and model. To determine what makes and models of trucks hold their residual value, “you have to look in your crystal ball and decide what the market’s going to want,” he said. For example, Knight used to buy “macho, square-nosed” trucks that got terrible fuel economy. The company switched to aero models but found that while some aero models sell well, others don’t.
• Specs. According to Williams, some specs such as engines and transmissions are very important but others not so much. “Don’t always believe what you hear,” he cautioned. He also advises fleets to beware of Blue Book residual adds such as APUs. “They supposedly add $1,500 to a truck’s value,” he said, “but it’s more like $0 to $500.” However, a truck may sell faster because it has an APU, he said. Bottom line: “Make sure the spec works for you. Don’t do it because someone else said you should.”
• Fleets that will be selling or trading trucks in the next four years, should be in a good position, Williams said. “The number of trucks bought between 2007 and 2010 aren’t going to be enough to meet replacement demand,” he said. Many fleets are buying used trucks to avoid the increasingly high cost of new trucks. “Supply is down. Demand is up. Market value will be way high,” he said.