When buying a vehicle, truck, trailer or bus, it’s important you make the right investment.
Some of the issues customers consider when deciding whether a particular vehicle is a good investment includes the quality of the build and if it meets the specifications required for their contracts.
Most businesses with outsourced transport and logistics needs will require their transport operators meet a number of compliance and responsibility requirements; for example, emission and environmental standards for their fleet.
Others buy based on brand, something that could be driven by the reputation of the manufacturer and the operators’ previous experience, ease of maintenance or special offers from manufacturers.
New versus second hand
Customers will likely consider whether there’s enough demand to warrant buying a new vehicle versus a second hand one.
Recently in Queensland there’s been a trend towards second hand purchases because of business uncertainty. However, sometimes the warranties and reliability factors make a new vehicle more cost effective. For example, a customer was looking to purchase a used truck from a private vendor. Their Business Banker went through the private sale arrangement and discussed the risks of purchasing a vehicle that was already 10 years old and had 900,000 kilometres on the odometer. The Business Banker pointed out there was a good chance the engine would need a re-build, leaving the business owners with additional costs in repairs as well as impacting their cash flow while the truck was off the road. NAB presented the customer with a quote based on the cost of a new truck and was able to structure it in a way that made the payments more affordable.
“The client had never imagined that they’d be able to afford a new vehicle with a factory warranty,” says Michael Cutting, Specialised Banking Executive at NAB. “We often provide advice outside our general transaction scope around brand reliability and negotiations with dealers. Because our specialists are out there speaking to so many customers we’re able to share insights of the sorts of experiences they have with dealers so they have some bargaining power when it comes to the negotiations.”
The hidden cost of not upgrading
Cutting gives the example of another customer who was initially reluctant to pay for new equipment because they thought it’d be too expensive.
“It was a bit of a false economy because they were paying a lot more on repairs and maintenance to keep the existing fleet on the road,” he says. “Also, some of their suppliers weren’t paying them the full amount because they didn’t meet the terms of the rules of engagement so they were losing money and weren’t getting bonuses. When we discussed turning over their fleet on a regular basis and what the financing costs would look like compared to the cost of repairs and lost income, it was more cost-effective for them to upgrade their fleet.”
The situation turned out to be a win-win for everyone involved. Their customers were happier because their fleet looked better, so it was better for the brand because there was more reliability in terms of service time and delivery. Their drivers were happier because they were in more advanced fleets so employee engagement was up.
“The net result for the customer was they had a better overall experience and were able to confidently go out to market and tender for more contracts knowing they could buy a new fleet to service it,” says Cutting.
Whatever you end up deciding, he suggests getting in touch with your Business Banker when you’re at the planning stage so they can talk through your options and work through the variables to determine which finance option is best suited to your circumstances.