MAXIMIZE YOUR TRADE VALUE
Chances are, if you are like most tow companies, as your older truck(s) start to nickel and dime you from repairs the following thought will cross your mind “I wonder how much a NEW TRUCK would be cost and I wonder how much my USED TRUCK would fetch on trade”. That thought crosses towers’ minds every day and the trouble is, if they are honest with themselves, they know their used truck is costing them money every week in repairs and excess maintenance costs.
So what do they do? They call me and tell me how wonderful their trade is. They use phrases like:
“I would trust driving this truck across the country and back.”
“It’s a clean one owner. Had since it was built in 2005.”
“Why don’t you take 6.0’s on trade. I’ve got nothing but the best out of mine 6.0.”
Or how about this one:
“With just a little TLC this thing would run like dream.”
On my end, I have to take it all in with a grain of salt. I’ve been burned BAD before and I have had a couple home runs. Most of the time if I keep my expectations low, then I can take trades at a price that works for everyone.
Rather than gamble every time you need/want to trade-in a truck, wouldn’t it be nice if you could demand top dollar? Wouldn’t it be nice to have a predictable number that you could count on nearly every time you needed to trade a truck?
Well, I have some suggestions that might give you that opportunity. Believe me, I don’t like playing the guessing game just like you don’t either. So, let’s break it down.
Here are the things I as a dealer have to consider about how much value to give for a trade-in:
COMPLETE SERVICE/MAINTENANCE RECORDS
TRUCK AGE, MILEAGE & HOURS
SPECS & CONDITION
RETAIL VS. TRADE VALUE
Also, in this blog I will give you a system you can implement into your business model to virtually remove all the variability and question about how much a trade is worth. Let’s dig in to it.
COMPLETE SERVICE/MAINTENANCE RECORDS
I can count on one hand how many times a customer has walked in my door with a binder of service and maintenance records that shows every oil change, tire replacement, engine work, and air freshener ever changed on their truck. And I mean every nut and bolt is in that binder. Warranty paperwork included.
On those rare occasions, without even seeing the truck, I know I have a good trade about to be presented to me and I am ready to give top dollar for it.
I mean think about it. If you went to see a used truck on a dealer’s lot and the truck seems like every think checks out. Then you walk in the office with the salesman and he has a two-inch-thick binder full of records for the truck.
Within just a couple of minutes perusing through the pages you now have the confidence that this truck is a great buy and has been VERY WELL MAINTAINED.
Contrast that to looking at a used truck and the salesman tells you that the last guy that owned said the top-end of the engine was gone through completely by the previous owner, but has no records for it.
Which scenario gives you more confidence to buy? Obviously, the truck with the meticulous maintenance records. See how that helps you demand more for your trade.
There are some repairs that tow truck owners do that they think makes the truck more valuable. In all reality to makes it more sellable. Let me explain what I mean.
If you have a 2016 F650 Carrier that threw a rod in the engine a year ago and you decide you were going to replace the engine. Let’s say before the engine went bad that truck was worth $45,000 on trade. Now, you spend $15,000 on a new engine and get the truck functional again. A lot of people have approached me in this situation and think that the new engine makes this truck $10,000 to $15,000 more valuable, when in all reality it does not. Not in the way that they think it should anyway.
Look at it this way. If you did not replace that engine and the truck doesn’t run, what’s that truck worth. It’s just the value of the bed, and only if it is in working shape. I then have to deduct the cost of removing the bed and re-installing it on another chassis. Might be looking at $5,000.
“But the chassis alone is worth more than that” you say to me. And I don’t disagree. However, I am in the business of Wrecker Sales, not dismantling or engine repair.
Back to the value of the truck with the new engine, your (now usable) truck is not worth $45,000 plus $15,000 equaling $60,000. It’s only worth $45,000. The engine replacement made the truck more SELLABLE not more VALUABLE. Makes sense?
Without the new engine, you can’t tow a vehicle with that truck. The amount you gain is going from a $5,000 trade for the bed to the $45,000 trade of a functional truck. Nothing more.
TRUCK AGE, MILEAGE & HOURS
These ones are easy and obvious items to think about, and for some people the only items to consider. They play a big part of the negotiation, but are only the starting point for seasoned dealers.
The age of the truck is mostly important when considering the resale opportunity, from a dealer’s perspective, because most banks don’t like looking at any piece of equipment over 15 years old.
Whatever formula they use tells them that most trucks are less reliable past 15 years and it becomes a risky investment on their part. With that being the case, this limits the buyer pool to only those with cash, and most people with hard-earned cash are going to be very picky on how they spend it.
Some banks don’t even deal with trucks that are more than 10 years old.
Therefore, trucks that pass 10 and 15 years old will take a large ding on trade-in value because of the limited buying pool of cash buyers.
Mileage seems like an obvious indicator of trade-in value, but having been in the business long enough I have learned that I have to compare the miles to the hours on the truck.
Why? I have taken trades from Texas to Illinois, and California to New Jersey. A Texas truck is going to register a lot more miles than hours because of the distance they have to drive between cities.
However, I have one customer in New Jersey who runs his truck in only a six square mile area in New Jersey and his trucks log way more hours than they do miles.
This then begs the question, which one is most important, miles or hours? Both.
On class 6 &7 trucks most extended warranty companies won’t offer any warranty longer than 300,000 miles. This indicates to me that they believe the life of a 26,000 GVW diesel truck is only 300,000 miles and after that point you are running on borrowed time.
On the other hand, every trade put in front of me from the bigger cities I always ask for the miles on the truck. In the case of my New Jersey customer with his HD trucks he might run a recovery call that take 15 hours, but he might only drive a total of 12 miles.
Too many miles and too many hours will quickly diminish trade value.
SPECS & CONDITION
When I build a new truck, I have to order in the chassis with certain specs. There are many factors to consider when doing this. Here’s just a small list I run through:
Engine Size & Horsepower
Fuel Tank Capacity
Locking Rear Differential
4×4 (On smaller trucks)
Steel vs Aluminum Wheels
Air Brakes vs Hydraulic Brakes
The tow units obviously have different specs to consider too. Some of those are:
Steel vs Aluminum (carriers)
Lighting Packages (so many options here)
Tool Box Selection and Storage
Rigging & Tools
Adding and SRS (Side Recovery System)
When a customer calls me and says “I have a 2014 Steel Carrier I want to trade. How much can you give me?”, there are a lot of things that run through my mind. Some of them are not nice as my brain wants to evaluate their education level and life experience.
I have to dig in to all of the above listed items and more. A 270HP engine vs a 300HP engine makes a difference in trade value.
One steel toolbox versus a complete Pro Series In-The-Ditch aluminum tool box set up can be difference of a few thousand dollars.
Air brakes are always worth more than hydraulic brakes.
The point being, any dealer is going to need to know all that information and any one worth their salt will be thorough at it too. So be prepared to supply all of that information and more before any number is offered to you.
Next is the condition of the truck and bed. I am a Jerr-Dan dealer and I know that every new truck that leaves my shop has a maintenance chart that spells out how often to grease zerks, which fluid to use in the hydraulic tank and winches, and how to check wear and tear on pins & hoses.
The first place and easiest indicator for me to judge the whole truck on is the crossbar pivot pin. If I walk up to the back of a carrier or a self-loading wrecker and can move the cross bar up and down 2 or more inches, then I know that the pin has worn through the bushings and started to affect the boom head and crossbar.
From there I can usually guess how well the rest of the unit has or hasn’t been maintained. Usually if there is slot in the cross bar pin I can look under the bed and see that pins for cylinders are seized too.
Form there I check for:
Hoses that have rubbed together
Lights that are out
Switches that don’t work
Rips in seats
Cleanliness inside the cab
Paint chips & damage
Crossmember and support condition
All of those things can bring the trade value down. Be ready for me to do a pre-trip inspection on your truck and then some. If I am going to spend my money on it, I want to know what I am getting in to.
If your tire tread is low or if you have damaged side-walls in the tires then I know I am going to have to replace them in order to sell the truck. That comes out of the trade-value.
RETAIL VS TRADE VALUE
Recent comparable sold trucks are another heavy indicator to help determine trade value. Customers all the time show me prices of some truck on Facebook that is priced at the very top of the market and they expect that full retail, clean truck, no issue, warranty still in place price as trade value from me.
First of all, if you are out of state and unwilling to bring the truck to me for an in-person inspection to prove to me that your truck is all that and a bag of chips, then I will never give you top dollar.
Second, there is a difference between retail value and trade-in value that most people don’t think want to think about.
Put yourself in my shoes. If you were the dealer, would you take a truck on trade at retail price just to try and turn around and sell it for zero profit. NO WAY! You would not be able to stay open and offer your services very long if you did.
You are always welcome to sell your trade on your own to get maximum dollar out of it.
If you don’t want to take the time and effort to list your truck on multiple sights and webpages, field all the phone calls, keep making payments on the truck while waiting for it to sell, and follow up with people that promise they are “Almost done with finance at their bank”, then you call and ask for trade value.
Those are some things that you can be relieved from when you decide to trade in your truck to someone like me.
We sell a lot of trucks every year and we record how much each truck sells for and use that information to determine what the market is willing to pay for most used trucks.
Just because someone lists a truck at one price, does not mean that it sold at that price. And it is the final sale price that we use to determine value.
From there we are using our money to floor it, we field all the calls, we fix it back up to working condition. And all that is also considered in determined a trade- value.
Now, all is not lost because you did not get retail value from your truck. One thing you do save is your new truck does not get charged sales tax on the amount of your trade.
So, for example, here in Utah the sales tax rate is 7.45%. On every $10,000 of trade value, you will save $745 in sales tax. Calculating that out means a $50,000 trade will save you $3,725 in Utah. That means you actually got $53,725 of value from your trade. Not bad, considering you don’t have to field all the calls and take time out of your busy day to answer all the oddball questions that potential buyers always have.
If you have read this far you now have a lot better understanding of what goes into considering a value for a truck on trade.
Don’t think you can rack up the miles & hours and retain value in the trade. In order to maximize your trade value and obtain top trade dollar you need to present a truck that is:
Correctly spec’d from the beginning
Has impeccable service/maintenance records
And still has a lot of life left (low miles & hours)
Find me at a trade show or schedule a time to call me and I can get more specific with you on these items and more. I can teach you a predictable way to determine your trade value and get top dollar every single time.
You might think this puts me at a disadvantage as a dealer, but it actually does the exact opposite. It provides me with easy to turn inventory. Contact me and let’s chat.