Finance Q & A - February 2012

What’s more important in determining a used truck’s value – mileage or model year?

Until recently, model year was the main factor in establishing a used truck’s value. That made sense; truck components were fairly similar from year to year. The older the truck, the greater its maintenance needs. So a newer used truck was almost always worth more than an older one.

That’s changed in the last few years; mileage has become the most important indicator of a used truck’s value. Thanks to new emissions equipment, different model year trucks are not quite comparable .

Today, the first question a shopper asks about a used truck is, “What’s the mileage?” The most desirable, highest-value used trucks will have 300,000 to 400,000 miles on them. Lower value but still desirable trucks will show 400,000 to 500,000 miles and up.

Is the Fair Market Value lease right for my business?

The Fair Market Value (“FMV”) lease features a fixed monthly payment and offers significant cash flow advantages. It is often called the “walk away” lease because you have no obligation when it expires – you simply return the trucks to PACCAR Financial.

Whether the Fair Market Value lease is right for your business depends on the answers to a few important questions.

  1. Do you need the tax depreciation associated with owning a truck? If so, a retail loan might be a better choice because the Fair Market Value lease does not offer depreciation.

  2. Do you operate on a regular equipment replacement schedule? The Fair Market Value lease might be ideal because you can time the lease for your regular replacement schedule. If you prefer to own equipment at lease-end, ask your PACCAR Financial representative about a TRAC lease.

  3. Do you prefer a fixed payment and "pay-for-use" financing? The FMV lease features a standard monthly payment, which is based on your anticipated mileage and the consistently higher residual value of Peterbilt and Kenworth trucks.

  4. Do you need equipment to accommodate date short-term business opportunities? The FMV lease might be perfect, because you can match the maturity of the lease to the length of your contract. If the contract is not renewed when the lease ends, you return the trucks to PACCAR Financial. Or you can choose to continue to lease the equipment or purchase it from PFC for the fair market value. Choosing the right financing product for your business always requires weighing its features against your specific needs. Your PACCAR Financial Representative can help or call 800-777-8525 for more information.

What specs on a new truck will return the highest value on the used market?

Ordering new trucks with certain specifications can provide an impressive return at resale. The right specs can also significantly reduce lease payments, because the higher a truck’s residual value, the lower the monthly payment.

“Four key specs drive used truck value,” said Jake Civitts, Director of Used Equipment for PACCAR Financial.

  1. Transmission: A convertible 9/13-speed transmission, a straight 13-speed transmission or a straight 18-speed transmission is most appealing to used truck buyers. According to Civitts, a 13-speed transmission adds about $700 to the purchase price of a new truck and increases its resale value by as much as $4,000.

  2. Interior: Lower quality interiors may seem cost-effective, but they show considerable wear. Used truck buyers are paying a premium for the Platinum interior package on Peterbilt trucks and Diamond VIT interior package on Kenworth turcks. "These interiors cost approximately $1,200 new and deliver an additional $3,000 to $4,000 at resale," said Civitts.

  3. Fifth wheel: An airslide 5th wheel offers the flexibility to suit any trucker's needs, which makes a truck more attractive to used truck buyers. The airslide wheel adds about $600 to the cost of a new truck and provides up to $2,000 in resale value.

  4. Aerodynamic fairings: A truck with full fairings is much more appealing on the secondary market, especially among buyers who are pursuing EPA SmartWay certification. "A truck with full fairings costs about $2,000 more at purchase, but commands up to $3,000 more on the used market," said Civitts.

Of course, the used truck market changes constantly, so these exact values are not guaranteed. Still, there is no doubt that specifying a new truck the “right way” can significantly improve its resale value – offering additional profit opportunities to owners and lower monthly payments to lessees.

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