Maintaining Work Trucks with Resale in Mind
Often, when fleets think of truck maintenance, it’s either their standard maintenance needs to keep a truck running, reactive maintenance to handle issues, and predictive maintenance to try and reduce vehicle downtime by anticipating problems before they occur.
Fleets don’t think about the impact of maintenance on resale until it’s time to sell their trucks, or a business may not think of the effect on resale.
The resale value of your truck is a significant component of its total cost of ownership. What you can sell your truck for at the end of its useful life for your operation will impact your fleet’s finances.
There are several things fleets should pay attention to and a few things that may not matter as much as you think they do — and other factors that may matter more than you realize.
Top Maintenance Factors to Keep in Mind
The first piece of advice is to have a plan for maintenance needs that keeps resale value in mind.
“How you purchase, warranty, depreciate, and utilize your assets should help determine your exit strategy. This may be based on time (48 months), mileage (100,000), or costs. Stick to a dedicated and consistent preventive maintenance (PM) schedule to address OEM recommendations and intervals for service and inspections. Keep excellent maintenance records and mileage/warranty accounts. Use data to track repairs, hours/milage, and costs. When repair costs exceed a set limit, it’s decision time. Track this internally or hire experts to do it for you,” said Jeb Outtrim, AVP & general manager at Amerit Fleet Solutions.
Keeping detailed maintenance records is essential.
“The most important factor is keeping detailed maintenance records throughout the vehicle’s lifecycle. Not only should you keep preventive maintenance records, but anything related to major component repairs and accidents. It’s better to be transparent and offer the records as part of the resale process,” said Brianna Perry, product marketing coordinator for Fleetio. “Diligent maintenance records can also be valuable as the vehicle is nearing the end of its lifecycle, so costly repairs are evaluated accordingly.”
Fleets should not ignore maintenance, especially preventive maintenance needs.
“Overall preventive maintenance is critical for getting top dollar when remarketing your fleet vehicles. Buyers want to avoid any surprises when they take ownership, and that service history is the best way to do it. The exterior and interior vehicle cosmetics are important, too. Before you sell, it’s always good to make sure tires have a decent remaining tread and that there aren’t any fluid leaks,” said John Herold, manager, fleet maintenance at Merchants Fleet.
As fleets look to maximize remarketing returns and, in turn, lower the total cost of ownership, Danielle Lucas, vice president, North American operations for Holman, noted the importance of embracing a holistic mindset.
“Remember, each phase of the unit’s lifecycle — buy, drive, service, and sell — impacts its resale value. Your maintenance strategy should be a particular area of focus. You’ll want to ensure you closely adhere to recommended preventive maintenance (PM) schedules for regular oil changes, tire rotations, brake inspections, etc.,” Lucas added.
Vehicles near their end of life and showing signs of excessive wear or neglect and needing repairs to get them “road-ready” for the next owner will have a reduced resale value.
“More often than not, it is significantly more financially prudent to properly maintain units throughout their lifecycle rather than trying to address costly repair before resale,” Lucas added.
If the real estate market is all about “location, location, location,” the used truck market is about condition, specification, and miles, noted Rob Slavin, senior valuation analyst at Ritchie Bros.
“If you’re looking to maximize resale value, make sure your truck is cleaned and detailed, all stainless-steel items are polished, maintenance history is available for review/or transfer to the next buyer, and the truck far exceeds DOT requirements,” Slavin noted.
Slavin also recommended that if an OEM or secondary warranty is still in effect, make sure it’s noted and determine if it can be transferred to a secondary buyer.
“Other things to consider? Replace tires under 10/32nd and brakes below 50%. Also, ensure there are no vehicle notification/fault codes/warning lights on the dash,” Slavin said. “Finally, consider doing a PM/B-wet service, so the next buyer is ready to roll confidently and with pride in their new purchase.”
Value of Regular Work Truck Maintenance
When discussing the top regular maintenance items that work truck fleets need to keep up with to ensure maximum resale value, it was unanimous that routine and preventive maintenance items are essential.
“All vehicle maintenance is important, but oil changes, transmission fluid, filter services, and differential fluid services are especially important to maximize resale value. For light-, medium-, and heavy-duty trucks, buyers often look to see if the maintenance has been kept up on high-cost components like engines, transmissions, and differentials,” said Dawn Schremp – Assistant Vice President National Service Department at Enterprise.
To help maximize a vehicle’s resale value, following the manufacturer’s recommended maintenance schedules is essential.
“Regularly completing preventive maintenance, including oil changes, brake services, tire rotations, fluid exchanges, etc., dramatically reduces the occurrence of costly, more significant component failures (e.g., engines and transmissions) that can impact a unit’s value at the time of resale. Completing these essential services will also help to ensure the manufacturer’s warranty remains valid,” said Lucas of Holman.
It’s important to remember that oil changes are important, but actual preventive maintenance encompasses the entire vehicle and should be followed like clockwork.
“This includes bumper-to-bumper walkarounds to identify potential failures, rotating tires on schedule, ensuring the brake system is operating to spec, an inspection of the steering and suspension components, proper fluid and filter changes, and ensuring electrical systems and bulbs are all operational,” said Joseph Shinn, technical manager, medium/heavy duty maintenance at Merchants Fleet.
Lucas noted that it’s vital to minimize PM variability by consistently adhering to recommended schedules and promptly completing these necessary PM services.
“When a fleet has high PM variability — inconsistent or erratic intervals between PM services — it typically results in significantly higher maintenance costs and increased downtime,” Lucas added.
Beyond the standard PM services, you should also tailor maintenance strategies to account for the units in your fleet.
“For example, diesel trucks have needs, and one of the most common failures we see in these units is when the diesel exhaust filter is not properly maintained. Additionally, medium- and heavy-duty trucks are often considered equipment, so it is important to be mindful of how the vehicle is used and how it may influence your maintenance strategy,” Lucas added.
Whom you have on your fleet team is also an essential factor. Employing a dedicated mechanic who knows your fleet can help catch critical issues early.
“It’s always cheaper and smarter to replace wearing or worn components before failure than it is to repair components taken to failure. Regular attention to grease and lube points will extend the life of all drive and wear components. And don’t forget the wash rack, especially in extreme conditions like dust, mud, or in areas where sand and salt are used in winter. Regular washes are critical and help preserve a professional-looking fleet,” said Outtrim of Amerit Fleet Solutions.
Don’t ignore major cosmetic repairs and the value of a clean fleet truck.
“To achieve the greatest resale value, major cosmetic items and cleaning should also be included in a comprehensive resale strategy. Signs of normal wear and tear are generally acceptable in the secondary vehicle market, but obvious signs of damage and neglect can create doubt in the minds of buyers,” Outtrim added.
Slavin of Ritchie Bros. noted that he “always recommends customers maintain their trucks and equipment to OEM specifications. All used truck buyers want to know that the unit has had the recommended maintenance.”
Top Truck Maintenance Items you SHOULDN’T Worry About
There are several items to consider when maintaining a work truck with resale in mind, but what are the things you shouldn’t be too worried about? One factor to consider is safety.
“If the item isn’t related to safety, you need to question if the return on investment for repair or replacement is worthwhile. While cosmetics can help net a higher resale, you won’t always get back what you put into dent repair. However, there is a difference between a ripped seat cushion, which should be repaired, and a cosmetic blemish to the dashboard,” said Herold of Merchants Fleet.
Remember, some wear and tear is expected with high-mileage trucks, so fleet managers shouldn’t worry about replacing or repairing minor cosmetic issues.
“The same can be said for add-ons such as toolboxes or roof racks. Repair or replacing these minor components will have little impact on resale value,” said Lucas of Holman.
Additionally, if a vehicle is getting close to the optimal time for resale or replacement, downtime can be a factor in deciding if an item is worth repairing.
“It’s common for downtime costs to increase over the life of a vehicle, so it may be worth it to trade downtime for resale and acquisition time,” said Perry of Fleetio. “If a vehicle is close to the end of its optimal lifecycle, it may not be worth it to put on brand new tires. Instead, if the tires on the vehicle are in excellent condition, replace them with tires that are in good to great condition and keep newer tires in your inventory.”
Most buyers want clean, well-maintained vehicles.
“What you purchase, when you sell, and how you manage your assets will best determine your resale value in the given market conditions. As part of your resale, any capital investments should be carefully considered,” said Outtrim of Amerit Fleet Solutions.
Schremp of Enterprise agreed that downtime needs to be considered and a few other factors.
“Fleet managers should also consider whether the additional downtime, cost, and risk of moving vehicles from place to place are worth the added resale value,” Schremp said. “For example, if a truck needs mechanical, cosmetic, and aftermarket equipment repairs, it may be necessary to have the repairs done at two or even three different repair shops. Depending on the issue and driver availability, it may be necessary to have the truck towed, which incurs additional expenses.”
In addition, fleet managers should be mindful of their intended audience when deciding whether to fix minor cosmetic, non-safety, and non-urgent items.
“Vocations that incur a lot of wear and tear on their vehicles may be more tolerant of minor imperfections,” Schremp added.
Customers understand they are purchasing a used truck, so normal wear and tear is expected.
“Fleets need to be aware of the out-of-the-ordinary items that potential buyers will notice. The older the truck, the more tolerable buyers are of scratches, dings, and small dents. However, I would suggest truck sellers repair anything that is not minor — buyers don’t want to purchase a project,” recommended Slavin of Ritchie Bros.
Equations & Ratios for Cost vs. Added Value
Understanding factors that matter, what a purchaser of a used truck cares about, and what items will impact your bottom line are all important. But, if you can’t come up with a profit/loss equation, you may be throwing money right into the trash.
“Like anything else, you want to get the most value for your dollar. The old rule of thumb was to get your investment back three times in the potential sale return, but it’s much more complicated than that. Now it is often wiser to invest a dollar-for-dollar return, especially on units that may have run multiple times or have any unique issues,” said William Boutwell, manager, remarketing at Merchants Fleet.
For example, take a commercial vehicle with 20,000 miles and worn-out tires.
“In most cases, a buyer wouldn’t pay extra if the vehicle has new tires, but you’ll get less of a return when selling because tires are needed. Leaving worn tires will also give buyers a reason to look more closely for other issues. Since the obvious hasn’t been maintained (in this case, tires), could there be a more serious mechanical issue?” Boutwell added.
According to Perry of Fleetio, some fleets calculate a threshold amount, so when a vehicle reaches a certain amount of maintenance and repair costs relative to its residual value, it should be replaced.
“Ideally, fleets can identify vehicles getting close to the threshold,” Perry said. “Exceeding that limit may mean an organization is unknowingly spending more money repairing a vehicle than it’s worth. While repair cost versus resale value is a good method for calculating replacement cycles, it doesn’t factor in vehicle usage, fuel, or condition.”
One ratio utilized by Holman is that repairs or reconditioning before resale should be at least 2:1 and ideally closer to 3:1 in terms of repair cost to added value.
“You’ll want to avoid anything that’s merely cosmetic or superfluous, but we recommend that each unit be cleaned and detailed before the vehicle goes up for sale,” said Lucas of Holman.
Fleet managers should clearly understand the requirements and costs of assets on lease or that have specific needs at turn-in.
“Market conditions at the time of resale should drive all decisions when it comes to making repairs vs. ‘as-is.’ Depending on if you own the vehicle or have a buy outvalue, may impact these decisions,” said Outtrim of Amerit Fleet Solutions. “In some cases, operations run their units too long. Not fully understanding maintenance costs or how maintenance costs can escalate based on higher-mileage services can be a common mistake. Having a professional fleet maintenance solution can help with these decisions.”
Fleet managers should always consider the age and mileage of the vehicle, what repairs are needed, and the expectations of potential buyers for all their vehicles.
“Some vocations may have a higher tolerance for minor issues, so cosmetic or non-critical items could be negotiated as part of the sale,” said Schremp of Enterprise.
Schremp added that fleet managers would inevitably encounter situations where it may be necessary to total vehicles due to high-cost repairs.
“Always consider the ROI of repairing versus selling the vehicle as-is or safely disposing of it. It’s reasonable to total a vehicle when the cost to repair meets or exceeds approximately 75% of the vehicle’s resale value if the vehicle was in good running condition,” Schremp said.
Just don’t forget to look at the math.
“Not spending $750-$1,000 on a clean and detail will cost you much more than the ‘savings’ of $1,000. It could be the difference between a retail buyer spending top-dollar vs. a dealer knowing it just takes a simple clean/detail to get looking retail ready,” said Slavin of Ritchie Bros.
Specialty Equipment & Upfit Concerns
Work truck fleets are the masters of the mixed fleet operation, operating a variety of vehicle makes, models, and class sizes, often with a variety of specialty upfits and equipment involved.
Units with specialized upfitting can be challenging because they’re typically very expensive and appeal to a limited number of buyers.
“We find many of these units are repurposed after purchase. This is an area where is it especially beneficial to have a savvy remarketing partner. Your remarketing partner can help you develop a strategy to get these highly specialized units in front of the right audience to maximize the pool of potential buyers,” said Lucas of Holman.
A remarketing partner can also help tailor a disposal strategy to meet your organization’s specific needs.
“For your organization, decide whether it is most important to maximize resale returns or liquidate units as quickly as possible — or most likely identify the sweet spot in the middle,” Lucas added.
Additional wear and tear on the vehicle is also important to consider.
“For example, if you have a bucket truck, you should pay attention to how it was mounted, if it was used properly, and if there is any damage to the rest of the vehicle from the upfit,” said Shinn of Merchants Fleet.
Don’t forget about the lead time, which is a major consideration with the current supply chain challenges, which Herold of Merchants Fleet noted greatly adds to the delivery time of an asset.
“Another thing to keep in mind is the service network of your upfitted components — if one of your trucks goes down and you can’t easily replace it, are replacement vehicles readily available to avoid downtime?” Herold added.
Perry of Fleetio shared that, for specialty equipment, it’s a best practice to keep some assets for replacement parts, assuming they are compatible with other equipment in your fleet.
But how does the math work out? Outtrim of Amerit Fleet Solutions recommended that truck fleet managers think of a bell curve with basic units on the left and highly specialized or upfit units on the right.
“Fleet managers should purchase, spec, and upfit units based on their operational needs and what delivers the best return on investment. The value at the time of resale will be based on the mileage and vehicle condition. How basic or specialized your assets are will determine how general or specialized the marketplace will be where you can attract buyers,” Outtrim added.
Schremp of Enterprise also recommended that fleets factor in the cost of adding, removing, or swapping aftermarket equipment from one vehicle to another when calculating the ROI of a repair versus vehicle replacement.
“The costs associated with aftermarket equipment should be added to the vehicle replacement cost. The truck’s value being sold with or without aftermarket equipment is another part of this equation that should not be overlooked. Of course, removing decals before resale is important to protect a brand’s reputation and business,” Schremp said.
Today’s work truck fleets can’t forget that EPA emissions standards for trucks are getting more stringent.
“Currently, in California, you can only register a model-year 2010 or newer truck, so older trucks will need to be sold out of state,” Lucas noted.
Originally posted on Work Truck Online