Depreciation of Assets

Decisions, Decisions

It can be difficult to decide on which type of vehicle is best suited for your business, or it can be as easy as which has the best dashboard for you to plug your devices into. There is a lot to consider though; payload, load length, seating, side loading doors, high roof and internal strapping.

Payment Options

Even though there are many different options available for you to get the perfect vehicle, there are also many different options available for you to pay for your perfect vehicle. It can be just as difficult deciding on that too, unless you have all the information. Outright purchase or finance? Brand new or used? Included maintenance costs? Mileage restrictions? The list goes on.

lochnessThere is always one black cloud hanging over any new vehicle purchase, depreciation. Depreciation can affect any product on the marketplace, and it can seem almost impossible to budget for. This becomes evidently clear when your vehicle nears the end of its life cycle and you have to start looking into making another huge investment to replace it. The process of doing so would then tie up large sums of your company’s capital, which could be better spent on other resources and actually developing your business.

Depreciation – the difference in price between what you pay for, and what you sell for. It’s a simple concept, but it can be a huge risk for companies of all sizes as it can be very difficult to predict changes in your business and in your industry. This risk increases massively as you scale upwards from small companies with one van, to a multinational company with a fleet of over 100 vehicles on the road.

Cause & Risk

Many things can cause depreciation, from general wear and tear, new products coming onto the market or a drop in demand. These are all things that can make it more difficult to sell on a vehicle towards the end of its life cycle, and because it can be so hard to predict, the risk involved in outright purchase of vehicles becomes very high. This risk factor increases exponentially with the size of the fleet, if you think it could be tricky to offload one run down vehicle, imagine trying to replace an entire fleet, and the amount of capital that’s tied up within it.

Risk Reduction

There are, of course, steps that can be taken to minimise the depreciation.

  1. Taking good care of the vehicles and driving them responsibly.
  2. Keep a good record of all servicing.
  3. Be thorough with your research and find the best priced suppliers for you.
  4. Could you be doing less mileage? Any reductions can make a big difference to the final sale price.

So depreciation can be controlled to a certain extent during ownership, but there are also other options available beforehand that can make an even bigger difference.

  1. Buying brand new vehicles is where depreciation hits hardest; it can differ from 10 to 40% in the first year!
  2. Choosing the right vehicle – depending on the manufacturer, some vehicles maintain their value for a longer period of time, due to build quality, availability of parts and also add-ons like tow-bars or in cab features.
  3. Balloon payments can often leave you in a far worse position at the end of your hire purchase, as you may still have to make a large final payment on the vehicle which is more than the current worth – an immediate loss.
  4. Rental – very often disregarded by CEO’s as an on-going expense, but it shields the owner from depreciation and can make it a lot easier to manage larger fleets with simple all inclusive monthly payments and the option to switch vehicles when necessary.

February - Stickers - reducedHow We Can Help

At Turner Hire Drive, we help our customers get the best deal for their business – whether that means a Flexible Rental agreement, our Owner Driver Scheme or through purchasing one of our Used Vehicles. We always make sure we get our customers the right vehicles for the job, and if the job changes somewhere down the line, we can switch models, scale fleet size or adjust your mileage rates.

You never know what’s around the corner in today’s economic climate, so why take the risk of tying into long term deals on depreciating assets that you may not have use for a year down the line? For more information on any of our products or services, get in touch via info@turner-hiredrive.co.uk or call us on 0870 90 20 200.