For the $2m+ guys - Truck purchasing

Discussion in 'Business Operations' started by BrendonTW, Aug 31, 2017.

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How do you buy?

  1. Finance New

    13 vote(s)
    50.0%
  2. Cash New

    2 vote(s)
    7.7%
  3. Finance 1-35k miles

    2 vote(s)
    7.7%
  4. Cash 1-35k miles

    1 vote(s)
    3.8%
  5. Finance 35k - 70k miles

    1 vote(s)
    3.8%
  6. Cash 35k - 70k miles

    3 vote(s)
    11.5%
  7. Finance 70k-100k miles

    0 vote(s)
    0.0%
  8. Cash 70k-100k miles

    1 vote(s)
    3.8%
  9. Finance 100k + miles

    0 vote(s)
    0.0%
  10. Cash 100k + miles

    3 vote(s)
    11.5%
  1. BrendonTW

    BrendonTW LawnSite Senior Member
    Male, from Oklahoma City
    Messages: 693

    I'm curious to know truck purchasing habits of the guys who have passed $2,000,000 in revenue. New vs used and finance vs cash. Please only vote if you're $2m + in revenue and purchase trucks less than 550/5500 (2 ton?) in size. Poll results are private but discussion is welcome.
     
  2. Efficiency

    Efficiency LawnSite Bronze Member
    from zone 6
    Messages: 1,783

    As your business grows, its likely the capital structure will change. There is a concept i learned back in college entrepreneur classes called your sustainable growth rate ( http://www.investopedia.com/terms/s/sustainablegrowthrate.asp ) that is a function of proftability and other things. We have been pushing 40%+ growth over the last 5 years. We simply couldnt keep capital structure the same thru that as the equation shows. When we started growing, I didnt have any debt on the company. Now we have more truck loans than i care for. We can service the debt but it still doesnt sit well with me. Our trucks get less than 10k miles per yr so our plan is to turn them every 10 yrs. Once our trucks are paid off in 60 months, we plan to continue paying the same payment to a savings account so when we turn them over at 10 yrs, we can start paying cash for the new ones.
     
  3. Mitty87

    Mitty87 LawnSite Bronze Member
    Messages: 1,026

    I've wondered about that too. Seems new is way to go but there is one large company in Oregon and the guy seems to buy a lot of used vehicles. I don't know if he ever explained his reasoning or numbers behind it though.
     
  4. snomaha

    snomaha LawnSite Bronze Member
    from midwest
    Messages: 1,231

    Our sweet spot over the last 5 years has been financing fleet vehicles with miles under 100k. Like efficiency said - I look at the debt service and cringe a little. We are also in growth mode right now and from a cash flow perspective, as long as the loan repayment is in sync with the depreciation schedule I'm good.
     
    Mark Oomkes, GrassManKzoo and Mitty87 like this.
  5. La Chandler

    La Chandler LawnSite Member
    Messages: 84

    "Efficiency, post: 5679420, member: 119621"]As your business grows, its likely the capital structure will change. There is a concept i learned back in college entrepreneur classes called your sustainable growth rate ( http://www.investopedia.com/terms/s/sustainablegrowthrate.asp ) that is a function of proftability and other things. We have been pushing 40%+ growth over the last 5 years. We simply couldnt keep capital structure the same thru that as the equation shows. When we started growing, I didnt have any debt on the company. Now we have more truck loans than i care for. We can service the debt but it still doesnt sit well with me. Our trucks get less than 10k miles per yr so our plan is to turn them every 10 yrs. Once our trucks are paid off in 60 months, we plan to continue paying the same payment to a savings account so when we turn them over at 10 yrs, we can start paying cash for the new ones.[/QUOTE]

    Using a 4% annual growth rate would take you about 15 years to double in size, if you don't die of old age first.
     
  6. Mitty87

    Mitty87 LawnSite Bronze Member
    Messages: 1,026

    He said 40%

    I remember asking you larger company guys about new or used trucks. Is it a bad idea for my wife and I to finance 2 vehicles when we are hoping to expand next year? We have one for her and would be quite a bit more efficient with an extra vehicle for myself. We hope to hire next year, the 1/2 truck market is ok but anything HD is outrageous here in BC. I have had horrible luck with used vehicles.
     
    Last edited: Sep 1, 2017
  7. onlythebest

    onlythebest LawnSite Senior Member
    Messages: 536

    We keep the pickups 2 years with about 60km on them.. so 40k miles or so
    Plan to keep the dumps 5 years
    I think it's easier to plan payments than breakdowns
     
  8. La Chandler

    La Chandler LawnSite Member
    Messages: 84

    See the article on SGR.
     
  9. Mitty87

    Mitty87 LawnSite Bronze Member
    Messages: 1,026

    Link?
     
  10. BrandonV

    BrandonV LawnSite Platinum Member
    Messages: 4,605

    i'll say this we tend to buy new and keep the trucks for a LONG time. I prefer new because we set the trucks up the way we want them and I know who had them before. I have had some issues with the new diesels but that's pushed me into the gas market for the light duty stuff now. I also think once you get past a certain volume of work you don't have the time to have vehicles go down. When something breaks it get expensive having crews sitting on the side of the road and/or disappointing your clients. I've told some of my young padawans that you always spend $ on tires and breaks- don't ever game it.
     

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