Truck procurement has been a major challenge for many private fleets and for-hire carriers this year. This challenge has been emphasized by the backlog of orders for Class-8 heavy-duty trucks, largely stemming from an American economy that has been healthy and resilient ever since the Great Recession ended in 2010, and a dilapidated industry philosophy toward truck procurement that is now changing.
According to the latest truck orders data, preliminary North American Class-8 orders for August—typically a weak order month—topped the historic records set in July. FTR Transportation Intelligence reported 52,400 units were ordered in August; ACT Research reported Class-8 orders at 53,100.
Instead, today’s leading private fleets and for-hire carriers are taking a different approach.
Truck organizations are now paying closer attention to a truck’s point at which it costs more to operate a truck than it does to replace it with a newer model, called TIIPPINGPOINT. Factors such as the cost of fuel, utilization, finance costs, and M&R, are all factored into arriving at each truck’s unique TIPPINGPOINT, giving fleet operations personnel and finance departments a closer look based on data and analytics into determining and even predicting the optimum time to replace an aging truck.
Just as important, recent changes to the corporate tax rate, as well as new accounting standards, have made it more attractive to lease equipment. With these changes, at least in the case of truck acquisition, purchase of equipment remains costlier compared with shorter-term leasing of the equipment. What’s more, leasing remains the preferred method for companies regardless if they have a stronger or weaker balance sheet. In addition, leasing also allows companies to avoid the risk of residual value and the expense of remarketing.
By adopting this new mindset of shorter truck lifecycles, transportation companies will become better equipped at replacing their aging truck fleets in a more cost-efficient manner heading into 2019.
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