The 9 True Costs of Owning a Work Truck

There are several costs that you should explore before buying a work van, truck, or trailer. While you might not actually need take all of them into account when buying, you should at least be aware of them.

Why?

As you increase the numbers of vehicles you use to run your business, vehicle fleet costs become more and more important. Fuel costs for a 1 van business might not be that important, but fuel costs for a 25 van business can eat into the bottom line.

We'll look at nine costs in three categories. They are:

Buying Costs

Buying costs are what it costs for you to become the owner of the vehicle.

• Purchase price
• Financing

Ownership Costs

Ownership costs are the tax and administrative costs that you and your business incur by owning the vehicle.

• Fees and Taxes
• Opportunity Cost
• Depreciation

Running Costs

Running costs are the costs required to keep a van, truck, or trailer on the road.

• Repairs
• Maintenance
• Insurance
• Fuel

Costs are clearly not the only thing that you need to look at when you buy a vehicle. Certain models might have specific cargo space, ergonomic, or payload requirements that you need. And those factors can easily override considerations of costs in certain situations.

Let's take a look at costs and see how you can reduce them.

1) Purchase Price (buying)

This is simple! This is the price that you pay when you buy a truck, van, or trailer for your business.

This is affected by things like trim level, size, capacity, etc. Beyond negotiating, there are a few ways to lower purchase price. Many truck and van manufacturers offer rebates or incentives that can lower this cost by thousands of dollars.

There are several incentive program offered by manufacturers if you're a veteran, or if you can meet certain fleet requirements. Some manufacturers have Competitive Price Allowances or Competitive Cash Allowances that also drop purchase price significantly.

Is it in your control?

You've got a lot of options to control the purchase price. You can seek out incentive and rebate programs, consider a different trim level, consider different sizes and capacities, or just buy a different vehicle.

There are creative ways to save money here:

• Buy a light truck and trailer combo instead of a heavy truck.
• Specialize in your trade to reduce your tools and material requirements so that you can use a smaller van.
• Use a small van for one job type and a large van for another job type.

2) Financing (buying)

Financing cost is how much it costs you to borrow money.

Every loan has an interest rate. Every time you make a payment on your truck or van, some chunk of that is essentially a fee for borrowing that money.

A $40,000 work van that is financed costs a lot more than a van that's bought for $40,000 in cash. (That doesn't mean you should pay cash for all your vehicles, though).

Is it in your control?

Yes.

Interest can really add up, especially if you have bad credit or take out a long term loan. But you have the ability to shop around for the best financing terms.

3) Maintenance (running)

Maintenance costs are all the expected costs of the work that's required to keep your truck or van on the road. These are things like:

• oil changes
• new tires
• new brakes
• drivetrain lubrication and oil changes

Some vehicles have higher fluid capacities, use more expensive parts, or take more time to do maintenance work.

Frequent maintenance periods and long procedures also mean more downtime for your vehicle.

Is it in your control?

No.

Aside from doing your own maintenance and shopping around for parts, you generally won't have a lot of impact on maintenance costs. You need to keep up with the recommended intervals to make sure that your vehicles will run well as long as you own them.

Two good reasons to keep up on maintenance are downtime and resale.

If you're a one man show, a downed vehicle means you can't even earn! For fleet owners, downed vehicles can affect efficiency (such as when you need to do an installation with a service vehicle), or just decrease the number of jobs you're able to do in a day.

4) Repairs (running)

Repair costs are all the unexpected costs of the work required to keep you on the road. These costs are a little more unknown since the problems that a particular model will have usually aren't apparent until a year or two of manufacturing.

It can be helpful to look at recall information to see the track record of different manufacturers and to see if a model you're interested in is reliable and safe.

Is it in your control?

No.

Like maintenance, you don't have much control over repairs. Repairs are unexpected and sometimes sudden. An unreliable vehicle actually costs you two ways:

1. You may need to pay for repairs unless you have a very complete warranty.
2. You can't use the vehicle to make money, even though you're still paying interest, insurance, registration, and other fees. (This is also known as opportunity cost.)

5) Insurance (running)

Insurance coverage varies a lot depending on driver history, coverage amount, and the specific vehicle you're driving.

Is it in your control?

Yes.

You need to buy insurance, but you can shop around for different insurance rates. Insurance costs can vary widely depending on how many vehicles you have, who will be driving them, and what models they are. You could, for instance, make a choice to buy smaller vehicles for your fleet that would be less expensive to insure.

6) Fuel (running)

You can't outrun fuel costs. Fuel costs are quite variable.

How frequently do you need to fill the tank? If your employees could fill up every 2 days instead of 3, that could result in the ability to complete a few more service calls in a given month.

Fuel can be a complicated issue and is affected by things like:

• Number of service calls made in a day.
• Amount of inventory carried on a truck.
• Proximity of supply houses to job sites.
• Weight and cargo volume of a truck.

Is it in your control?

You get to choose the fuel efficiency of your trucks or vans, but you don't choose what the price of gas or diesel is.

While you could encourage employees to drive slowly to conserve fuel, this is not realistic as a cost saving measure unless it's enforced with a monitoring device.

7) Fees and Taxes (ownership)

These are mandatory fees that everyone pays on purchase and registration.

Expensive trucks and vans will usually require hefty sales tax. Administrative fees like registration also increase with your vehicle's size and may be affected by fuel type and GVWR.

Is it in your control?

No.

You can't do anything to change these amounts besides buying smaller vehicles that have lower GVWRs.

However, for some businesses, differences in fees are practically a rounding error.

8) Opportunity Cost (ownership)

Opportunity cost is what you could be doing with your money instead of buying a work truck or van. If you spend money on a truck or van, that may limit your ability to buy tools and equipment or hire employees.

For instance, if you want to start doing a new type of work, or you want to start specializing, you might need a new piece of equipment. You need to decide which makes more sense for your business.

Similarly, if you invested your truck/van budget or kept it in a savings account, you would earn interest on that money. (With today's typical bank account rates you should be able to put your money to work for a higher return than you'd get parking it in a savings account!)

Is it in your control?

You have control over how you allocate the money in your business.

You have less control over income generated from investing or saving your money. You can likely hit a "standard" rate of return with some investment types, but a smart business owner may be able to generate a better return through her business.

9) Depreciation (ownership)

New vehicles depreciate in value as soon as you drive off the lot. Thereafter, your vehicle loses value depending on age, mileage, and condition.

Is it in your control?

No.

Besides selecting a vehicle with a lower depreciation rate, and taking care of your vehicle, you won't have much control over depreciation.

Conclusion

Deciding to purchase a new vehicle and then picking that vehicle can be difficult to figure out. But by thinking about the costs of owning a vehicle, you can find the one that will have the most benefit for your business.