Sticker Shock: Upgrade Options in a Runaway Economy

As inflation, pandemic aftershocks, and supply chain issues continue to keep a tight hold on the pocketbooks of businesses and households alike, small business owners and companies of all sizes are more cautiously looking at the ways in which they spend their money. In particular, those who are due for work truck upgrades have undoubtedly noticed a sharp increase in both the new and used automotive market, spiking prices higher and, in many cases, out of reach for those who need replacement vehicles the most.

A report released earlier this year by the U.S. Bureau of Labor Statistics indicated the average price of used vehicles increased by 40.5% since January 2021. While not as drastic an increase, new vehicle prices have also risen over 12% in the past year.

With customers debating buying used or new due to the near identical price points, what’s the best “bang for the buck?” More importantly, how are businesses expected to keep operating at a profit (and not facing the potential of having to shutter their business) when the economy maintains a stranglehold on operational costs?

Steve Henning, senior marketing director at Work Truck Solutions recently provided some answers to questions commonly asked by business owners looking to replace their vehicles in a tight economy.

 

What are my options as a small business owner?

“Flexibility is key. It’s important to look at true goals to make the best decision possible for your business.

Do you know your daily cost of NOT having a vehicle? That will help with ROI calculations.

Another important point to consider is do you NEED a NEW truck/van or do you NEED a vehicle and just WANT a new one? If it’s more of a WANT, consider a used vehicle, especially if your plan requires something immediately.

While this might seem counterintuitive based on the comparative price increase for used vs. new, you have to balance that with the immediacy of your need. And, if your business doesn’t log significant miles, you should also consider a used vehicle that may be a little older with more on the odometer, as long as it’s still in good working order.

Another possibility to consider is vehicle sharing.”

What are my options as a fleet owner/decision maker?

“Again, flexibility is important – and so is planning. The days of walking onto a dealership lot and picking the work vehicles you need are gone, at least for right now, and potentially forever. Therefore, planning is critical.

You need to be sure you’re looking several months to a couple years into the future and forecasting what you’ll require for your fleet. And then, you need to work with dealerships who are also forward thinking and taking orders today for those businesses with future vehicle needs. Why? Because these are the dealerships who will likely get early allocation when supply chains begin to “break free,” and you want to be as near to the top of the list as you can be.”

How do I get the best deal/avoid overpaying?

“A few thoughts come to mind here.

1. Servicing your vehicles. You surely already know how important it is to keep your vehicles in good shape, but this is even more true today. Therefore, you definitely want to be certain you are maintaining your work trucks and vans to ensure they serve your needs for as long as possible.

If you have a local dealership (if you’re a small business) or perhaps your own internal fleet maintenance department, it might be good to re-examine your plan just to be sure you aren’t missing anything. After all, an ounce of prevention is worth a pound of cure in today’s environment.

2. Use the tools at your disposal. While shopping around has a whole new meaning compared to even one year ago, there are tools out there that can help you see what inventory is available, not only locally, but nationally.

For example, Comvoy.com has listings of commercial vehicles for sale nationwide. While you might be in Texas, if there’s a vehicle that fits your requirements in Illinois, you should probably consider it since it may be exactly what you need. You should also talk to your upfitters and dealerships. Those years of building relationships with vendor partners can really help.”

Future outlook: Will prices steady or, better yet, decrease?

“What will the future look like in terms of price and availability? This is a bit like asking that old Magic 8-ball.

Many of the prognosticators have said availability and pricing will improve, but some have been saying that since 2021 and many of those same people continue to push the timeline, with some saying expect the same until 2023 or worse.

The reality is that it’s difficult to say since there are so many factors in play, not only automotive related, but globally as well. However, some recent good news is that many production plants in China are coming back online, and there continue to be efforts to stand up additional production lines to help mitigate some of the problems.

In looking at pricing data, while year-over-year prices have increased dramatically, there has been minimal relief in recent months. For example, new work trucks were up 15.5% Q1 2022 v. Q1 2021 and used work trucks were up 31.9% Q1 2022 v. Q1 2021. But, overall used work truck prices in Q1 2022 rose far less dramatically than in the prior quarter (based on data Work Truck Solutions tracks). Additionally, the price movement was mixed when looking at specific types of vehicles.

The best advice is likely similar to an old saying: ‘You should hope for the best, but plan for the worst.’

In other words, hold onto your optimism, but be sure that you also have a plan in place to meet your business goals that includes alternatives based on market conditions.”