Now that summer has finally begun and economies are starting to open back up, we’ve been fielding a lot of questions regarding the “best” way for smaller businesses to invest in new trucks and vans.
Full disclosure? This article is going to make every attempt to be impartial – we’re not going to “name names” or make any flat statements about this dealership or this bank or this manufacturer.
We’re simply going to try to objectively report what our own research has found here lately…
Some of this is going to apply every year about this time, and some of it is only going to really be relevant this year – the effects of the coronavirus means many things that were “usually” the case simply aren’t that way this year.
Sooo… if you are in the market for a new vehicle, what does that market look like right now?
For starters, since many manufacturers shut down in the pandemic, inventory – usually high this time of year, is very low. As of last week, one dealer we spoke with who regularly has 100 or more new trucks on his lot in June had nine.
Granted, they were nine nice examples – from base models to fully-loaded luxury pickups – but still nine.
The other challenge for manufacturers is this: even those that are open aren’t necessarily capable of producing 2020 models – they are retooling for 2021 – and remember – Ford and GM both shut down multiple assembly lines to produce respirators.
Over the years, many of our customers have viewed this model changeover time as a great opportunity to grab a “new” truck or van as the outgoing model year and save a few thousand dollars.
The lack of inventory (and to a lesser degree, the lack of interest in purchasing new trucks and vans), is making that harder to do this year.
What we are seeing, though, is that dealerships are really trying to make sales happen. They know the environment they are operating in and so manufacturers are making some truly astounding offers – 0% interest, tons of cash rebates, and some long-term maintenance deals that are tough to beat.
Of course, you usually can’t get all three, so what’s the right choice?
Without having to prove all of our numbers, our sources in the industry, comprising over fifty years of sales experience, all shared the same answer with us:
If you can, take the rebates and pay the interest. With interest rates being so low now, companies and owners that have the financial ability to put cash down – and thus dictate how much is being financed – can often negotiate a very nice interest rate, shorten (or lengthen) the term, and then take those rebates and incentives and pay far less for the same truck or van than “0% Financing” can offer.
But what if you don’t really like that option?
Well, all those folks who are buying new – rental fleets, utility companies, and even delivery businesses – all tend to sell their trucks and vans long before they have any appreciable mileage on them.
Again, not giving away names, but one of the largest rental fleets in the country sells all their light trucks and vans before they hit 20,000 miles.
That’s not even broken in yet!
Of course, big companies like that have systems in place to “dispose” of that inventory – and they aren’t simply giving those vehicles away. If you can find them, though, you can often snatch up some incredible deals at auction or via certain commercial truck resellers. In those cases, you don’t lose the depreciation AND you can often use very similar interest rates to buying the newest models.
When it’s time to sort out and find the next truck or van for the fleet, if you don’t already have a system or a relationship in place, it definitely pays to do your homework.
Take your time and run the numbers.
Look at the value of having cash reserves on hand; look at how long those cash reserves would take to be replenished if you used them for an institutional investment like a new(er) vehicle upfitted perfectly for the job and, most of all, do your homework.
Even if you find that a zero percent interest rate is the better deal for your business personally, understanding the bottom line on cash rebates versus interest rates can give you an important bargaining chip when you sit down to negotiate.
And when you do get that new addition to your fleet, contact Expertec to explore upfitting solutions specifically tailored for your requirements.