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 itís 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, itís 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, youíll need to take a good look at your entire fleetówhether itís one truck or 100óto determine its condition. After that, youíll 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? Letís begin on the outside, and consider glass carriers.
No matter the region of the country youíre 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 theyíre 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 canít ward off the ravages of time and weather. When a high tensile steel carrier looks tired and rusty, itís probably time to replace it.
Aluminum glass carriers are a very popular choice. Theyíre lightweight, less expensive than steel and should last about ten years. Most manufacturers use 1/8-inch aluminum, which is very ďbeefy.Ē A drawback to aluminum is that, because itís 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. Itís virtually maintenance-free, although the welds should be checked regularly to ensure the integrity of the carrier. Because stainless steel is not painted, thereís 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 Companyís 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 youíre driving equipment that doesnít 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 youíve 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 youíre 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 youíve been running. Again, you have to consider the overall cost-benefit of such a purchase. If productivity is suffering because you donít have the right equipment for the job, then itís 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, youíll 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, itís 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, youíll begin to see a picture emerge that tells you when itís time to replace a vehicle. Especially if you own the truck and are out of warranty, itís 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 donít pay much income tax, perhaps due to a business loss or high operating expenses, leasing can be an attractive option. While leasing doesnít 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 donít 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 companyís image and your budget.
© Copyright Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.