March 18, 2023
Buying a New Semi-Truck vs Used Rig
The decision to buy a used or new semi-truck isn’t one that should be made lightly. Financially it makes the most sense to get something new when you can, however, your business’s situation might call for a used truck instead. At the end of the day, you’re the best person to make the decision because you know your needs and circumstances better than anyone else.
Here are several factors we’ve discussed on our Haulin’ Assets podcast that you should consider when deciding which one to purchase.
General pros and cons to consider
It’s important to remember that used doesn’t always have to mean old; a used rig could still be fairly new and just gently used. You’ll have a wide range of “used” conditions to choose from, so if you’re leaning towards used, take care to inspect the rig’s condition thoroughly.
Used is always cheaper up front, which is part of what makes it an appealing choice for newer owner operators who are still trying to build up their business. One of the biggest pros to buying used is that you won’t have to spend as much money on the bank loan’s interest. Having a lower payment means more money you can use to build up other parts of your business and less of a financial investment lost if you have to sell the rig or change the business’s direction.
You can also expect to close the sale much more quickly when buying a used rig. The auto industry still hasn’t fully recovered from the economic challenges and shortages caused by COVID-19, so purchasing a brand new rig can sometimes be a time consuming venture.
Buying new, however, has its own set of pros. First, you have the advantage of knowing the truck’s history as the original owner. This helps with general maintenance as the truck ages, plus you’ll be able to quickly identify if you have a ‘lemon’ on your hands. If you’re looking for peace of mind, a new truck can deliver. The newer it is, the less likely it is to come with expensive problems. That means less stress for drivers and usually a higher fuel economy.
The lower risk and increased reliability makes purchasing brand new rigs an appealing option for more established businesses with the funds to invest in a new truck. However, keep in mind that if you have to get rid of a new truck, you likely won’t get all your money back since their value depreciates so quickly.
Research and understand fuel efficiency
Fuel economy improves every few years, but it’s important to remember that new may not always mean more efficient. Sometimes a new rig with all the extra bells and whistles can actually have a lower miles per gallon (MPG) rate.
In addition to the efficiency of the engine, the total cost to fuel a truck will also partially depend on driving techniques such as how often the rig is left idling and for how long, how fast it’s being driven on the road, the axel and gear ratios, and how often the driver makes a large speed change. The aerodynamics of the trailer and whether or not its using low-rolling resistance tires can also significantly affect your fuel efficiency.
But, all things considered, you’ll likely save more in fuel if you buy a rig with a more efficient engine, so be sure to take time to research your options and tips for improving fuel efficiency.
Shop around for the right insurance
When it comes to insurance, older trucks take the cake because they cost less to insure. Let’s break this down a little further.
All trucks require a few types of insurance, regardless of whether the rig is new or old:
- Cargo insurance – This is pretty straightforward. It’s what you use to protect and insure cargo in case it gets damaged during a trip. The difference in this type of insurance for new and used rigs won’t be very significant.
- Auto liability insurance – This takes up the largest chunk of insurance costs and is meant to cover damages if you hit someone else and become responsible for paying to fix their vehicle and cover their medical costs.
- Physical damage insurance – Similar to liability insurance, this would kick in when you end up in an accident and need to cover damage to your vehicle. This is also where the biggest difference in insurance costs kicks in. If you’ve got a new rig, you’ll have a significantly higher cost for your physical damage insurance because the cost to repair any physical damage to a new truck can be much higher than it would be with an old one. The bottom line? Newer rigs have a higher value than older ones, so they will be more expensive to cover.
Interest on loans
Old trucks are the way to go here. This is because banks make money on the interest paid for a loan. They much prefer to finance a new truck because it means they’ll get more money from the interest on your bank loan than they would on what you would borrow to buy the used truck that’s less expensive. This is something to keep in mind because, unless you have a way to pay for most of the cost up front, the interest you’ll pay over time for a new rig may result in a much higher total out of pocket cost. Be sure to keep an eye on current interest rates so you can take advantage of them when they’re low!
Maintenance and repairs
Maintenance is something you have to do on any truck, old or new. Oil changes, normal wear and tear, tire replacements, and general upkeep to keep your truck running smoothly are all necessary parts of being an owner operator. But new trucks will generally take the win here because they don’t have any prior wear and tear to repair.
The older something is, the more likely it is that big things will need to be replaced — and soon. Even replacing several smaller things can add up quickly. When you buy new, you get a new warranty that can help you avoid significant expenses within the first few years of ownership. When you buy used, you run the risk of footing the bill for expensive repairs yourself without a warranty to help soften the blow. In this Haulin Assets episode, you can see how a warranty protected Chris from having to pay for a very expensive engine rebuild out of pocket.
When buying used, it’s always a good idea to make sure to run a basic maintenance test and have a mechanic thoroughly check out potential trucks before you commit.
Don’t operate at a loss
When buying used, it’s important to make sure the mileage is towards the lower end. This can help ensure your expenses up front won’t be as high. Once a used truck gets close to a million miles, it’s time to look at letting it go because it might cause you to operate at a loss. You can do some small things to limit losses on a used truck like making small repairs yourself and maintaining the truck well, but keep in mind that eventually you will always hit a point where a truck is costing you more money than it’s bringing in and, when you hit that point, you want to get that truck off the road sooner rather than later.