Repayments are structured to suit the business’s cash flow needs. On average a new truck takes around three months to generate enough sales to break even so the commencement of monthly repayments are delayed accordingly.
Tasty Trucks takes out a seven-year lease for each van, repaying them at around $1,200 per month, although the vans can be on the road for as long as 10 or 12 years.
“It works really well for us that we can finance them over that seven-year period and then it becomes something that just gets expensed into a van. You can pretty much say, ‘This is how much it’s costing us for a van’,” Lear says.
“I don’t really consider our fleet finance as debt, I prefer to consider it as the rental on our retail outlets.”
Using vehicle and equipment finance for the fleet frees up funds in the business for other investments. When Tasty Trucks sets up in a new state, it needs to commit to a serious investment in a local food production facility before the commencement of operations.
“With the production facility, you need to invest around $2 million before your first van rolls out the door. We like to do that with cash rather than by going into debt and it frees up your cash to do those types of things as well,” Lear explains.
He describes the last three to five years of a van’s working life after the loan has been paid off as “a bit of a free kick” because of the savings on repayments.
Nonetheless, he is careful to ensure that the fleet is continually being renewed.
Many other food truck operators are held back because they're reluctant to renew their vans, thinking they'll maximise the returns on each van by running them for as long as possible.
“It costs them a fortune in maintenance and no doubt it costs them heaps in lost sales,” Lear says. He looks upon new vans as akin to a refurbishment of traditional bricks and mortar fast food outlets, which he says typically get a 20 to 30 per cent increase in sales after the refurb.