Being an owner-operator can be a lucrative career, but it comes with some hefty expenses. From equipment to insurance to diesel, you need to keep a lot of costs in mind. These trucking company expenses can be high enough to scare people away from becoming an owner-operator.
The costs associated with this industry don’t have to be prohibitive. There are plenty of ways to reduce your owner-operator monthly expenses and make the business more profitable for you. One of the best strategies for this is buying used equipment.
Some people are timid about buying used equipment from fear of performance issues or related costs. If you go about it the right way, though, it can drive down your expenses by a considerable margin. Let’s take a closer look at how this works out.
Economic Challenges Facing the Trucking Industry
You may want to consider used equipment because of the state of the trucking sector. The industry won’t fall anytime soon, considering that trucks carry 70% of transported goods in the U.S. Still, there are some economic challenges on the horizon for trucking companies.
The most prevalent threat facing the trucking sector is the ongoing COVID-19 pandemic. Many businesses, and even entire industries, have faced cutbacks because of the virus and have slowed or halted shipments. Demand for transport in industries like restaurants has dropped, leaving fewer opportunities.
At the height of the pandemic, loads fell by almost 60% compared to 2019’s figures. While things will improve as the economy reopens, experts still predict an overall slump for trucking in 2020. It will take a while for the economy to recover, so new owner-operators need to reduce costs.
How Used Equipment Can Drive Down Costs
Buying used equipment is one of the easiest ways you can reduce owner-operator expenses. A new truck can cost as much as $175,000, with a down payment as high as $10,000. If you’re new to company ownership, you may not have that kind of capital.
You may be able to get three used trucks for the price of one new one. They won’t last quite as long, but having three means you can deliver three times as many shipments. Buying new may be more reasonable if you were only getting one truck, but you need more than one to grow a business.
Truck cabs aren’t the only piece of equipment you can buy used, either. You can find used trailers for less than $10,000, depending on your needs. With cheaper equipment, you can buy a variety for the same price, helping you haul more freight.
Used equipment isn’t only more affordable upfront, but it’s also cheaper to operate. Insurance is one of the most significant owner-operator monthly expenses, and it’s cheaper to insure an old vehicle. As a result, a used truck will lower your costs throughout its entire life cycle.
Used Equipment and Upward Mobility
Older trucks’ lower ownership costs also improve your flexibility as an owner-operator. Ideally, your business will grow with time, and you can expand your operations. To sustain this growth, you’ll need more trucks, and buying used ones is an excellent option here.
You could buy new equipment as you bring in more profits. While newer trucks could bring you some advantages, you wouldn’t be able to expand as much. Opting for used trucks instead enables you to buy more at once and grow faster.
Older equipment doesn’t depreciate as fast as new options do, either. Between the time you buy a used truck and when you sell it, its value won’t have decreased as much. When the time comes to sell, even though you’ll get less at once, you’re not losing as much money.
All signs point to used equipment enabling more upward mobility. Eventually, you may come to a place where you can afford to expand with new trucks. In your first few years of operation, though, buying used trucks will enable faster growth.
Considerations to Keep in Mind With Used Equipment
Despite all the advantages of buying used equipment, you do need to be careful. Going with the cheapest upfront costs every time could adversely impact your trucking company expenses in the long run. The most critical thing to look for with used equipment is its condition.
Even when buying used, you want to avoid anything too old, since it won’t last as long. Look at the truck’s age, as well as its wear and tear, mileage and repair history. If a truck has both low mileage and a low price, there could be something wrong with it, so be skeptical.
Look for trucks with fewer than 600,000 miles and as few past repairs as possible. Something with higher mileage or a history of repairs could mean more maintenance in the long run. Too many needed fixes could cancel out any money you save on upfront costs and insurance.
Make Your Trucking Company More Profitable
If you know what to look for, used equipment can substantially lower owner-operator expenses. These savings will help you get off the ground and start making a profit sooner. In today’s economy, these considerations are more critical than ever.
Starting a trucking company can be intimidating at first. You can ease some of the pain by lowering costs through used equipment. If you want to become profitable as soon as possible, consider buying used.
Megan R. Nichols is a technical writer and the editor of Schooled By Science. She regularly contributes to sites like Industry Today, Born2Invest, and Business Process Incubator. Follow Megan on Twitter @nicholsrmegan and subscribe to her blog to stay in touch.