I’d be lying if I told you at the start of this series of articles on used trucks that this update would find us in the grips of such uncertainty. We had a plan for this content, we had mapped out what we thought would be the most relevant to our used truck customers, we had a schedule for delivery. Then the terrain started to shift beneath our feet. Our plan needed to change.
The same scenario has likely happened to you and your used truck team. You bid on a package of trucks in one environment, traded for them in another and found them ready to sell in another still. What felt like a good plan that was going to give you plenty of time and now it looks like you’re about to get your ears pinned back. How do you know when it’s time to change the asset management plan? Here are a few questions to ask yourself to help decide if it’s a good idea.
1.)
What’s your cost to market? A truck’s “cost to market” is the difference between your investment in the unit and the average sales price for similar units. If you don’t have contemporary data for retail sales, take 90% of the average asking price. If you have a positive cost to market, you have room to either stay the course or extend your asset management plan based on how big that number is.
2.)
Is my problem short term or long term? Not every bump in the road requires action. A bankruptcy from a fleet that runs trucks that look like yours is going to cause some short-term pain for your salespeople, but those units are going to get flushed from the system quickly and some semblance of normalcy is likely to return. If inventories are rising across the country and causing industry wide pricing pressure, that’s unlikely to change in the short term and you need to act and adjust the larger plan.
3.)
Is this the first time I’ve seen this issue? Have you seen the same problem repeatedly? Is your internal control failing you no matter what external forces you’re seeing? If this is the third time you’re finding yourself in the same situation then it’s not just a “black swan” event. You need to change your plan!
With those ideas in mind, do YOU need to change your asset management plan given the current pandemic news? Well, without knowing the answer to at least a few of the questions we outlined, we can’t say for sure. Based on evidence we have seen at the auction block, the market doesn’t appear to be panicking. To the contrary, this may ultimately be a boon to a currently saturated used truck market. Logistics are an undoubtedly crucial industry and is going to be a key factor in distributing necessary medical supplies throughout the country. Trucks are going to need to keep running. Hiccups in the supply chain and new truck manufacturing process are going to slow down the new truck production/ used truck creation cycle which could be good news for both the supply and demand side of the used truck equation. So in our opinion, steady as she goes with your asset management plan. If a truck is long in the tooth, get rid of it. If you bought it well, hang on to it and get creative. If you bought it bad, own the mistake and move on. Steady as she goes!
Please join me for a webinar on this and other important topics pertaining to Absorption Habits for the Used Truck Department on Friday, March 27 at 12:00pm Central Time.
