Don’t let your heart rule your wallet
By Timothy Brady
Should I buy new or used? is a burning question every small carrier faces. The simple answer is, don’t ever buy more truck than the hauling revenue will support.

The big mistake many owners make is allowing emotions to decide what truck they purchase. This works when you’re buying your dream sports car, because that sports car won’t be generating revenue. But when purchasing a vehicle that is going to produce the income (so you can have that shiny sports car), you must approach this purchase in a business manner—make sure the numbers work.

The foremost thing to know is your budget. Know how much you can afford to invest before you start looking. Make sure you don’t ‘over-buy for the neighborhood.’ There’s nothing worse, three or four months into owning and paying for a truck, than to discover your revenue doesn’t meet the payment. Know your monthly break-even point. This is the place in time and revenue where red meets black, the line between losing money and making money.

Next on your list is to consult your accountant, to find out whether to finance or lease. This is also when you look at the tax ramifications. What about capital gains tax if you sell your current truck? Would it be better to trade it in, from a tax perspective? Don’t be left owing a large tax bill. Do the research first and save yourself thousands. Investigate different financing and purchasing options: local banks, finance company, national leasing company, dealer financing, private party financing, Small Business Administration Loan, or a second mortgage on your house. Go over these with your accountant so you know what’s in your best interest.

Remember, if you’re going to add amenities—creature comforts—be sure they benefit your bottom line. Example: an auxiliary power unit (APU) may seem excessive, but with the new idling laws and fuel costs, it may be one of your most important add-ons. On the other hand, having marker lights every three inches so they see you in Nebraska as you enter the scale in Evanston, Wyoming, may not be the most financially prudent add-on. But if you’re going to use the truck as a show truck, and having all those lights wows potential shippers into requesting your services—then it might be a good idea. Be sure you use practical financial judgment, not emotional desire, in these decisions.

Once you’ve determined where the funds are coming from, and how much you can afford, you need a list of facts on each truck you’re considering. Eliminate the lemons and move the others to the ‘A List.’ For a truck to make it onto the ‘A List,’ start with ten key pieces of information. If any of this information is incomplete, or denotes particular negative occurrences or conditions, you immediately drop that truck from consideration.

Next week I’ll list the ten key facts you’ll need on each truck you’re considering for purchase or lease.

Until then, good loads and good roads, everyone.
Timothy Brady  © 2010
www.timothybrady.com

731.749.8567