How you spec a truck has a direct bearing on its future resale value. Here are 20 mistakes in truck spec’ing that will negatively impact resale values:
Not Including the Power Take-Off (PTO) Provision
Even if there’s no need for PTO in a truck’s initial use, the availability of the PTO provision will make a truck more attractive to buyers in the secondary market because it saves the future owner from having to pay to add the provision.
“Not being PTO-ready, which is a relatively inexpensive option when ordering a truck, can stop a sale cold if the buyer needs a PTO,” said Ken Gillies, manager – truck excellence, Midwest Region for Element Fleet.
Spec’ing a Manual Transmission
There are fewer qualified drivers today capable of operating a manual transmission than in the past.
Automatic transmissions are required by most companies when selecting a vehicle, which makes automatics more desirable from a resale perspective. In addition to resale value, an automatic transmission assists in driver acquisition and retention, lowers maintenance costs, and increases uptime.
A manual transmission may be desirable if you are operating in mountainous terrain, but most applications work fine with an automatic.
Not Knowing the End Users
It is extremely important to know the operators of fleet vehicles.
“Engage in discussion groups to gain a first-hand knowledge of components and compare similar suppliers,” said J.J. Keig, CAFM, corporate fleet manager for CBRE. “It is also important to understand the credentials of the installer and ensure the completed vehicle is not modified by the drivers.”
Spec’ing Diesel Engines Under 230 HP
Spec’ing higher horsepower and torque ratings will allow a truck to be used for a wider range of applications, expanding the potential pool of customers on the secondary market. The key is determining the horsepower/torque “sweet spot” where the truck offers sufficient power for its initial duty cycle, while increasing possibilities for future resale, without paying too much up front.
Spec’ing Unusual Exterior Colors
Some fleets prefer to have their vehicles “stand out” and may have elaborate paint schemes or unusual colors. While this may be important in meeting a corporate image or marketing campaign, these units require additional expense to be “de-identified,” further chipping away at a net resale return. Other, non-standard colors will negatively impact the initial sale price of a unit. If possible, stay with white as a base color. You can use a wrap for any branding scheme instead of using a non-traditional color.
“The typical buyer is looking to put the vehicle into service quickly; the need to repaint it will quickly stop a sale,” Gillies said.
Not selecting white as the exterior color is typically a marketing decision, but you should try to influence this decision by pointing out the detrimental effect on resale. If pushed, you could use a wrap for a branding scheme instead of using a factory color other than white.
If the decision is to use a wrap, you need to take into consideration the ease of its removal when the vehicle will be resold.
“A full-vehicle wrap or complicated graphics impacts the de-identification time and cost. If the graphics are particularly difficult to remove, repainting may be necessary,” Gillies said.
Under-Spec’ing 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 also affect how a used unit sells,” said John Brewington, president of Brewington & Company.
Over-Spec’ing a Truck
Some companies over-spec to a higher GVW to handle more payload weight than necessary, which impacts both the up-front acquisition cost and ultimate resale value.
“If your calculations for GVW say you need 24,000 pounds and you add a 20% (reserve GVW), you are at 28,800 pounds. That’s great; however, try selling a truck that will require a driver with a CDL to drive it. This will increase your costs and the next owner’s costs. In fact, you will probably get less for a 28,000-pound truck than a 26,000-pound truck,” said Ed Burke, general manager for VIP Truck Center.
Over- and under-spec’ing is another issue that impacts resale from the standpoint of weight.
“A lot of companies either over-spec to handle more weight than necessary which costs much more up front and is not necessarily recouped on the resale. Conversely, many companies under-spec their trucks then run heavier that allowed causing damage and incurring higher maintenance and repair (M&R) costs along with long-term damage to the truck chassis and components which could impact resale,” said Steve Saltzgiver, manager for Mercury Associates, Inc.
Re-Using Upfit Components on a Second Chassis
“When equipment or upfitting is removed from the old vehicle (with the objective of eliminating the need to purchase a new equipment) there is an immediate diminishment of the old vehicle’s resale value due to rust, bolt holes, wear marks, etc.,” said Keig of CBRE. “Also, by retaining the old components, it will prevent a fleet from taking advantage of newer and more refined products.”
According to Keig, the desire to re-use upfitting components, include, but are not limited to:
• Toolboxes for pickup trucks.
• Ladder racks and sometimes racks and bins from vans.
• Trailer hitches of any kind.
• Lights, etc.
“This mindset can only be marginally successful if the fleet has in-house maintenance facilities, and this may not produce the desired benefits, except in very specific circumstances,” Keig added. “When the reduction of vehicle resale value, including the labor required to remove and clean, is compared to the cost of the new equipment, there can be little, if any, financial gain to be achieved in reusing upfit equipment and often this will cost more money. In addition, by retaining the old components, it may prevent the advantage of utilizing newer and more refined products.”
Skimping on Driver Amenities
“Skimping on driver amenities will lower the resale price, such as spec’ing bare-bone units without suspension seats, Bluetooth, automatic or automated transmissions, ‘economy’ grade interior, no radio, or power windows and locks, or even no air conditioning,” Brewington said.
Attempting to save money on driver amenities is penny-wise, pound foolish. “Spec’ing minimal driver amenities to save capital dollars will hurt resale value,” Saltzgiver said.
Selecting Too Short or Too Long Body Lengths
A body that is too short limits the available cargo space, while a longer body requires an extraordinary wheelbase, which makes it much more difficult, slower, and riskier to maneuver within a confined yard or in an urban environment. “Resale value will also be inhibited resale by unique trailer lengths — any dimension outside the standard 53-foot in a van trailer,” Gillies said.
Not Selecting the Right ‘Grade’ of Material
The day-to-day use and application of the vehicle often determine the “grade” or type of materials that are used. For example, how much weight may be carried on the shelves? Will small parts need to be organized or just large bins for bulky items? A fleet manager’s knowledge of his or her customers plays a vital role in determining the correct materials that will be used for any upfitting.
“The same racks and bins or compartments for a flower delivery service may not be suitable to carry heavy pipe fittings used in the oil and gas industry. This certainly follows the spec of the base chassis, including the anticipated terrain that may be covered,” said Keig of CBRE.
Not Using Qualified Upfitters
One critical factor that must be kept at the forefront when any upfitting is contemplated relates to “what is being considered and who may be doing it?”
“Today’s vehicles are more complex than ever, which translates to the utmost sensitivity and awareness of any additions or modifications,” Keig said. “Air bags and sensors are found everywhere. The wiring systems cannot tolerate any compromise or change of the milliamps that may be transmitted. Fuel lines and other similar items are hidden everywhere. One small nick in a wire, much less a tap or connection, can wreak havoc and result in costly repairs. This also may compromise safety equipment of the vehicle. Professional upfitters spend many hours of technical education to understand where all OEMs permit attachment or anchor points and electrical connections, and this is often dictated by the structural design of the vehicle. One or two holes for a simple screw has the possibility to compromise the integrity of the vehicle upon upset or collision.”
Not Spec’ing Liftgates that Take into Account Secondary Buyers
If you are going to use a liftgate, important considerations are tuck-under versus flip-up, level-ride versus wedge, composition (aluminum versus steel), operating characteristics (power down versus gravity), and platform size. These are important differentiators for secondary buyers in the resale market.
“Think of a liftgate as the equivalent of a swimming pool when discussing a home sale, some people want them, others don’t, but you always have to bear in mind the cost to maintain them and that may impact the desirability and therefore the price. I would not consider these liftgate attributes to be universal gospel, but generally indicative of a desired spec, bearing in mind that many specifications can be altered at a reasonable cost and with small effort, such as exchanging 22.5-inch wheels for 19.5-inch,” said one truck fleet manager who wished to be anonymous.
Buying Equipment Solely on Basis of Cost
The old saying, “you get what you pay for” has a direct bearing on successfully spec’ing trucks or upfits.
“This certainly holds true with upfitting for both the longevity of the components and safety of the employee, but also to bring value at resale time. If quality components are used and remain with the vehicle, there is a strong likelihood that this will be appealing in the secondary market,” Keig said.
Not Spec’ing a Limited Slip Axle & Trailer Hitch
A limited slip axle and trailer hitch should be standard on pickups, since they are important to secondary truck buyers. Also, a trailer brake controller should also be specified any time a hitch is installed.
“From my experience, anyone who specs out a truck with a trailer hitch on it and does not order a trailer brake controller is making a big mistake for safety sake,” said one fleet manager who wished to be anonymous. “Our 1-ton trucks come with the trailer hitch and trailer brake controller together as standard equipment. On most ½-tons, it is optional, but I justify the added expense of adding a brake controller for safety considerations.”
Not Ordering a Locking Differential for a 4x4 Truck
If you do not order a locking differential you might as well buy a two-wheel-drive truck since a four-wheel-drive truck without this option can find it difficult to operate in an off-road environment. The purpose of the locking differential is to always have at least one wheel on each axle with traction to move off of a rock or log in an off-road environment. Power gets split to the wheel with traction. If there is no locking differential, power goes to the spinning wheel so you just keep spinning. Why buy a $40,000-$50,000 four-wheel-drive truck and omit a $300 option that improves the performance, capability, and, ultimately, resale?
Not Doing Your Own Research
“The biggest mistake companies make when spec’ing vehicles is accepting the word of the supplier as to what is needed. As an example, as technology has exponentially increased suppliers are constantly up selling their new technology to purchasers whether it’s needed (proven) or not. Companies should do their own research as to the overall value as it pertains to the current operation and potential resale,” said Saltzgiver.
Not having a Remarketing Mindset
“The two main considerations in the spec’ing process is accuracy and thinking “remarketing” when spec’ing out a truck,” said Levi McCoy, director, remarketing for LeasePlan USA.
“If you aren’t clear or haven’t thought ahead about your remarketing needs, a consultation with your lessor’s sales and account management support are vital to ultimate remarketing strategy. Knowing up front the total cost of ownership will help with the financial and mechanical considerations. Then once the fleet manager has decided to terminate or remarket a truck, seasonality is something to strongly consider,” said McCoy.
Modifying the Original Configuration After-the-Fact
“Upfit components added or modified from the original configuration. It usually means the vehicle’s upfit looks sub-standard and the secondary buyer quickly moves on to a vehicle without the problem,” Gillies said.
Selecting Chassis Suppliers with Limited Networks
“The selection of the OE chassis supplier that doesn’t have an extensive network, may be inadvertently hurting yourself in some geographies when it comes to remarketing options,” Gillies said. “You may have to relocate a vehicle to maximize value.”
Understand the Balance of Resale & Application
Ultimately, trucks are tools of a trade and the chassis merely provides mobility and power to operate 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.
In addition, mileage and general condition will play a major contributory role in determining desirability and resale value.
There are also key differences in resale considerations by truck GVW segment. There are distinctive differences between the secondary markets for Class 3-5 and Class 6-7 box trucks. For the most part, with a Class 3-5 chassis most customization is limited to the body design.
With Class 6-7 box trucks, you must start with the basic design attributes to create an “ideal” vehicle for ultimate resale in the secondary market: This often includes:
• Day-cab chassis.
• 20- to 24-foot dry van body.
• Roll-up doors.
At the end of the day, a work truck is a tool and, as with any tool, it has to meet its purpose. A fleet manager’s role is to provide a proper tool for the intended job application, while maintaining a reasonable secondary market resale value.
Originally posted on Work Truck Online