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THE FLEET INDUSTRY
Is it better to buy new, used, or not at all in today’s market?
To buy new or to buy used, that is the question — at least it’s the question many people are asking themselves when it comes to buying vehicles in the current market. With supply issues and sky-high prices for both new and used inventory, it’s hard to know what the best option is. Some are even choosing not to replace their vehicles at all and trying to ride out the high prices and low inventory.
Every business’s situation is unique. But regardless of where the market is, when it’s time to replace a vehicle, it’s time to replace it. If you’re in a position where you’re deciding on what to do with your older fleet vehicles, we think there are four main things to keep in mind.
Prices for both new and used vehicles have been at record highs. Though supply chain issues and the shortage of microchips has made the situation worse for new vehicles, prices for used vehicles have skyrocketed while inventory has remained sparse. According to an article from Kelley Blue Book, they predict used car prices will climb again as we get into peak seasonal demand and as delayed tax refunds hit prospective buyers’ bank accounts.
Coming out of the pandemic, depreciation of used vehicles has slowed too, leading to used prices rising faster than new prices. According to an article on CNBC, “As the price gap narrows, buying new becomes more appealing because the vehicles are in better condition, plus, they have a full warranty and can be financed at a lower rate.”
Not only are vehicle prices rising, but costs for maintenance and repairs are also rising due to lack of inventory and parts. Plus, the average age of vehicles on the road is rising. A report from the industry consultancy IHS Markit showed that the average age of light vehicles in operation in the U.S. was up to 12.1 years in 2021, the highest number they’ve seen since they’ve been tracking the data.
Older vehicles on the road means more needed maintenance and longer wait times for everyone. If your vehicle is in the shop, it’s not on the road earning money and business. Not only are you sinking more funds into an older vehicle, but you could be actively losing money from potential lost business while waiting on repairs. Plus, there’s always a bit of a gamble when choosing to maintain an older vehicle. You could put more time and money into maintenance and repairs, and the vehicle still might need to be replaced because it’s not operating how you need it to.
The good news about buying new in the current market is that vehicles are maintaining their value better now than they ever have before. If these trends continue, when it’s time to inevitably upgrade your fleet again, you’ll get more out of your old vehicles than you would have been able to in the past.
You’ll also see the benefits of working with industry experts like us when it comes time to sell or trade in used vehicles. With our resources and contacts, we’ll make sure you’re getting the best price for your vehicle. We don’t just take vehicles to auction. We take the time to figure out how much your vehicle is worth and get the most for it that we can.
When adding vehicles to a fleet, one of the biggest deciding factors of whether a business owner should buy new or used is how they plan to pay for the vehicles. Financing vehicles allows you to reserve your cashflow for operating expenses, and rates will typically be better for new vehicles. Many lenders and banks won’t even finance used vehicles if they are more than a few years old.
No matter what you decide to do in this challenging market, it’s important to work with someone who understands fleet management and the transportation industry. Many large banks don’t lend in the fleet space, or if they do, they don’t understand the equipment and business model. United Leasing & Finance has worked in this industry since 1964 and has grown into a third-generation company with a dedicated team of fleet experts ready to put their knowledge to work for you.
United Leasing & Finance is a customer-focused and growth-oriented leasing and finance company committed to providing custom financing solutions to businesses across the U.S. and Canada. For more than 60 years, they have partnered with clients to achieve mutual success from small businesses to Fortune 100 companies and has been financing in the fleet space from the beginning. United is also a proud member of the NAFA Fleet Management Association and the International Franchise Association (IFA).
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