Volume 38, Issue 11, November 2003

Going the Distance
Knowing When it's Your Time to Update Your Fleet

by John R. Weise

Above: Rust is a common problem for steel carriers. 

Although the U.S. economy is showing some signs of recovery, most business owners still have to be very cautious when deciding to make large capital expenditures. Whether it’s to replace an entire fleet of trucks or one or two glass carriers, the same principles apply to the decision-making process. The primary factor, no matter the size of the purchase, is a cost-benefit analysis. When the costs of maintaining and operating aged equipment reach a point of diminished return, it’s time to invest in new goods. Other factors that must be considered are the condition of your fleet and the image you want to project to your customers.

Before you actually begin a cost-benefit analysis, you’ll need to take a good look at your entire fleet—whether it’s one truck or 100—to determine its condition. After that, you’ll need to consider the options that best suit the needs of your business. Do you need to replace a truck, or just its glass carrier? Do you lease or buy a truck? Diesel or gas? Let’s begin on the outside, and consider glass carriers.

Metal Choices
No matter the region of the country you’re in, rust is the number-one enemy of steel. Painted, high-tensile steel glass carriers generally can be expected to last four to eight years, depending upon how well they’re treated. If kept clean, stored indoors and touched up when the paint is nicked, eight years is a reasonable length of time to expect a steel glass carrier to last and still look good. Of course, that would be in a perfect world. Even the most diligent cleaning and paint retouching can’t ward off the ravages of time and weather. When a high tensile steel carrier looks tired and rusty, it’s probably time to replace it.

Aluminum glass carriers are a very popular choice. They’re lightweight, less expensive than steel and should last about ten years. Most manufacturers use 1/8-inch aluminum, which is very “beefy.” A drawback to aluminum is that, because it’s a softer metal, it fatigues more quickly than steel. Aluminum should be inspected monthly for strength, and, in particular, to make sure the welds are not broken. In some cases the welds can be repaired, but often a replacement carrier is in order when the welds are shot.

Stainless steel offers the greatest longevity. It’s virtually maintenance-free, although the welds should be checked regularly to ensure the integrity of the carrier. Because stainless steel is not painted, there’s no touching-up required, and it is more durable than either high-tensile steel or aluminum. The initial cost is higher than the other two metals, but the longer lifespan of stainless steel often justifies the expense. 

Your Company’s Image
While evaluating the condition of existing equipment, you also need to think about the image that you want to project for your business. Even if your glass carriers look slightly tired, your customers may wonder about your dedication to quality if you’re driving equipment that doesn’t sparkle. You want your fleet to be in first-class condition to reflect your business as a first-class operation.

When does size matter? Perhaps you’ve found yourself in the enviable position of having increased sales. This can be a good news-bad news scenario. Increased sales are wonderful, but they may force you to upgrade your fleet before you feel you’re ready to do so. That could mean upsizing your vehicle to meet increasing demand, which may be a signal to look at a 12- to 16-foot glazing body to replace the van or pick up truck with exterior racks that you’ve been running. Again, you have to consider the overall cost-benefit of such a purchase. If productivity is suffering because you don’t have the right equipment for the job, then it’s time to consider an upgrade. Maybe you have a thriving shower door business, and now want to add storefronts to your line. In a case like that, if actual sales justify the outlay, you’ll want to upgrade in order to grow your business.

Factors to Consider
When purchasing a new truck, several factors come into play. Besides budgetary constraints, an important option to consider is whether to go with a gas or a diesel engine. A diesel costs about $4,500 to $5,000 more than a gas engine. However, with the lower cost of a gas engine, you could purchase approximately 2,800 more gallons of fuel for almost the same cost of a diesel engine. On the plus side for diesel, it’s not uncommon to put 200,000-300,000 miles on a diesel engine, compared to 100,000-200,000 on a gas engine. The increased longevity of the engine may make diesel an attractive option for some.

The biggest factor in deciding whether to update your fleet, of course, is money. As you track fuel and maintenance costs, you’ll begin to see a picture emerge that tells you when it’s time to replace a vehicle. Especially if you own the truck and are out of warranty, it’s hard to justify continually throwing money at an old truck when you can take advantage of the new, accelerated deprecation rules. For big capital expenditures, the government has made it more attractive for business owners to upgrade their equipment, while at the same time increasing cash flow. Section 179 of the IRS tax code allows equipment purchases, up to $100,000, to be deducted from taxable income (expensed) if installed by December 31. The 2003 law quadruples the amount of qualified property that can be expensed under IRS Section 179 from $24,000 to $100,000 for tax years 2003, 2004 and 2005. This allows business owners to depreciate capital expenditures at a much higher rate than before, thus resulting in lower tax obligations and increased cash flow.

For business owners who don’t pay much income tax, perhaps due to a business loss or high operating expenses, leasing can be an attractive option. While leasing doesn’t offer the depreciation advantages of buying, there are still operating expenses to write off, and none of the expensive maintenance hassles. Smaller companies often benefit from a lease arrangement because they don’t have the kind of buying power or budget for capital improvements of a much larger company.

No matter the size of your business, the decision to update your fleet comes down to the same basic things: the condition of your current equipment, the image you want to project and economics. Older fleets always cost more to operate over time, and the day will inevitably come when the decision to update or upgrade must be faced. The decision on how and when to do that can be made by carefully and honestly assessing your fleet, your company’s image and your budget.

USG