Transportation companies are no different from companies in any other sector: most of them are focused on improving their profit margins by reducing costs and maximizing revenues. Transportation companies have little control over business costs, including labour and fuel costs, but have significant control over the cost of maintaining their truck and equipment fleet. Around the world, trucking companies are recognizing the importance of effective fleet management. Buying and selling the right trucks at the right time – and through the right channels – can have significant impact on the bottomline.
The most efficient fleet is one that is operating at maximum productivity with minimum cost. So the most important decision is what kind of truck to buy: new, late model or older? Buyers pay a premium for brand new trucks direct from the manufacturer or dealer, but truck values depreciate fastest in their first few years and thus lose their resale value.
A 2007 model truck is relatively new in the middle of 2008, but as soon as the 2009 model trucks are released, the 2007 model is effectively two years old. All of a sudden, buyers aren’t willing to pay as much for that truck as they might have been just a few months earlier.
A good, well-maintained truck is a viable alternative to a new truck, offering similar benefits in terms of reliability and cost of operation, but without the initial depreciation. The key point is to look at the condition of the truck rather than its year model since it gives a better indication of its true value.
When to sell
The next most important decision to make is when to sell. An increasing number of companies recognize that an idle truck that generates no income is actually costing them money. Keeping an idle truck in your fleet does not make economic sense. You want to have enough trucks in your fleet to get the job done, but not so many that you have equipment lying idle.
At the same time, keeping trucks and other transportation equipment beyond their useful life makes just as little sense. The longer you keep a truck in your fleet, the greater the cost of maintenance added up. Ongoing maintenance to keep a truck in running condition, wear and tear, storage, insurance, licensing and interest on outstanding loans are all costs that can be minimized if you sell your old trucks at the right time. If you wait too long, your truck will have little or no resale value at all.
Transportation companies that are committed to maintaining an efficient fleet look carefully at the cost of maintenance of their trucks. They take into consideration the purchase price, the cost of maintenance and the potential resale value after one, two or more years, and then decide on the ideal time to sell. Many companies have discovered that the key to successful fleet management is planning ahead, rather than waiting until a truck has passed its useful life and can no longer be sold.
Another major consideration for many transportation companies is environmental regulations. Laws intended to reduce the impact of emissions from trucks and cars are in force. As a result, transportation companies are turning over their fleets more frequently than in the past, in order to keep their fleet compliant to emission standards. That means more used, late model trucks on the market, and a significant opportunity for buyers in regions with less stringent regulations in place.
Efficient channels
Timing is an important consideration in effective fleet management. But how to buy and sell trucks is probably the most crucial decision that a transportation company can make. Whether you are selling trucks as part of a fleet upgrade, or in an effort to reduce the size of fleet, you want to make the best deal possible, regardless of whether you’re selling one truck or a few hundreds.
Trucking companies have several options when it comes to selling their trucks: they can sell them privately, sell them to a used truck dealer, use the services of a truck broker or send them for auctioning.
Selling privately is one of the most popular methods. Many people assume that this is a cost-effective means of selling, but the opposite is often true: the seller is responsible for cleaning and preparing the truck for sale, making any necessary repairs, advertising, meeting with any prospective buyers and then taking care of the financial transaction. The entire process can take weeks, even months, with no guarantee of a sale at the end. You are limited to the local region for potential buyers and any time spent on selling equipment is time spent away from your core business.
Used truck dealers advertise and show your truck to potential buyers; they can usually do repairs and arrange financing and some type of warranty for the buyer. Dealers will either charge a commission or buy the truck outright and keep all proceeds over and above what they paid you.
Brokers act as a go-between for sellers and buyers, and can facilitate a relatively quick sale. They take a commission for matching you up with a buyer, but won’t assist with things like title transfer for financing.
Used truck dealers and brokers take a lot of responsibility for the sale away from the seller, but both charge a premium for their services.
Unreserved auctions
There are generally two types of auctions: unreserved auctions, in which there are no minimum bids or reserve prices, and auctions with reserves, in which the seller sets the minimum selling price. Unreserved, or absolute auctions are one of the fastest and most efficient channels for buying and selling trucks and other industrial equipment.
When they choose to sell by unreserved auction, owners know that their trucks and equipment will be sold on a certain day. This enables them to plan ahead and manage their fleet more effectively by maintaining the optimal number of trucks at all times. They can also focus on their core business and let the auction company advertise, market and sell their surplus assets.Buyers come to an unreserved auction knowing that every item would be sold to the highest bidder on auction day, regardless of price. They know that if they are the highest bidder, they will have a new truck or piece of equipment they can put straight to work as soon as they have paid for it. Best of all, they know that they are paying fair market value for the item – not the price set by the owner or his agents. That is why unreserved auctions typica
lly attract a number of potential buyers.
Ritchie Bros. auctions
An increasing number of transportation companies are using unreserved auctions to facilitate effective fleet management – and thousands of them are turning to Ritchie Bros. Auctioneers, the world’s largest auctioneer of trucks and industrial equipment. It has 50 years of experience in the auction business, a global network of offices and auction sites, an annual calendar of more than 350 unreserved auctions, and a proven record of conducting fair, transparent auctions, with no reserve prices and no buy-backs.
A Ritchie Bros. auction is unlike any other auction in the world. At each industrial auction, an average 1,400 lots for the transportation, construction and other industries are sold. The large selection of equipment and the knowledge the bidding process is fair and transparent attracts hundreds, even thousands of registered bidders on the auction day. Bidders are willing to travel a long way to attend an auction, and the auctions have become known for the large numbers of international bidders they attract. This helps sellers achieve global fair market value when they are selling their valuable assets.
If you’re looking to manage your fleet more effectively, contact Ritchie Bros. to find out more about the benefits of buying and selling trucks and other transportation equipment at an unreserved auction. Check out the large selection of transportation equipment items available in upcoming Ritchie Bros. auctions around the world at
www.rbauction.com/transportation. Ritchie Bros. Auctioneers is the world’s largest auctioneer of transportation and industrial equipment, having sold more than $3.18 billion worth of equipment at more than 350 unreserved auctions around the world in 2007. The company sold more than 17,000 used and unused transportation units during the year, including truck tractors, trailers and related equipment.Ritchie Bros. has more than 110 locations in over 25 countries, including India. The company conducts auctions at its 38 full-service auction sites, including sites in Singapore, the United Arab Emirates and Australia, as well as many offsite auctions. It intends to conduct its first unreserved industrial auction in India before the end of 2008.
For details, contact: Sameer Malhotra, Ritchie Bros. Country Manager, email:
smalhotra@rbauction.com
“India’s used equipment market is not mature,” explains Mr. Sandeep. “The construction and infrastructure industry is booming, so people aren’t selling their equipment – they’re using it. That makes it very difficult to find good quality, used equipment in India.”
Mr. Sandeep was accustomed to sourcing used equipment from outside India, but did not attend his first unreserved Ritchie Bros. industrial equipment auction until 2003.
He says: “I had never considered buying equipment at an auction before. I attended a few Ritchie Bros. auctions as an observer. I wanted to understand the bidding process and to ensure that the operations were transparent, with no insider bids. I wanted to make sure that it was a real market scenario, with the price being set by legitimate bidders. Only then did I register to bid.”
Mr. Sandeep placed his first bid in 2003 at a Ritchie Bros. auction in Dubai, and has since purchased millions of dollars of equipment at unreserved Ritchie Bros. auctions around the world. He now attends three or four auctions per year, most often in the Middle East and Europe. What keeps him coming back? The fairness of the bidding and buying process, and the knowledge that he can find the equipment he is looking for – and put it straight to work.
He observes: “Ritchie Bros. auctions are amazing. The selection of equipment is incredible, the pace of the auction is fast, and the whole process is very fair and efficient. I know what equipment will be sold, I can inspect it before the auction and, if I am the successful bidder, the equipment is available right away. That is of critical importance to a construction company like Punj Lloyd. If Ritchie Bros. has the specific equipment we need, I would certainly buy through them rather than from a dealer or another auction company.”
Although he is willing to travel a long way to participate in an unreserved Ritchie Bros. auction, he is pleased that Ritchie Bros. has opened its first sales office in India, with the aim of conducting its first auction in India sometime in the country soon.
“India’s construction industry is growing at a fast rate, and there is a great need for good quality used equipment”, Mr. Sandeep adds.
