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TOWING & RECOVERY March 2012 Keeping industry pros on their tows FOOTNOTES 3 ® AD Partn tow ers Se VI e P S ag O e 1 R SPREAD THE WORD! Email your press releases about new or improved equipment and services to the Footnotes editor! bill@trfootnotes.com Buying New Or Used? www.trfootnotes.com T&R Footnotes Helps Build Better Business SPOTLIGHT Safety & Signals See page 6 In The Towing In This Issue: Fred Scheler of Henry’s Wrecker Service Current thinking on an age-old industry question BY THOMAS G. DOLAN Motor Clubs Associations Advertise Now! Call David Abraham 877-219-7734, Ext 1 Volume 22, Number 11 x $3.95 © 2012 Causey Enterprises, LLC. All Rights Reserved. For April: For May: Most towers consider an ongoing upgrading of their equipment a normal part of doing business. But the down economy has put a clunker into that aspect of standard operating procedure for most towers. “I think the trends throughout the industry are towers making do with less for longer,” said Stacey Tucker, owner, Chico Towing, Bremerton, WA. “They are putting money into repairs to keep equipment going longer, longer than was the case five to ten years ago.” PRST STD U.S. POSTAGE PAID PEORIA, IL PERMIT NO. 315 Towing & Recovery Footnotes P .O. Box 64397 Virginia Beach, VA 23467 ® Yet Tucker said that the poor economy “has also led to many towers trying to get out from under financial obliga-tions by downsizing,” so that means there are some pretty good deals on used equipment out there. “Yet this doesn’t necessarily mean you should jump at the opportunity,” Tucker con-tinued. “You have to be cautious not to obligate yourself without a certain level of breathing room for so many things in the economy can still happen unexpectedly.” “It’s very important you become conscious of not being ego-driven about buying equipment,” she added. “Buying equipment can make you feel proud and important, but that’s not a good reason for buying it.” A Good Return Tucker acknowledged that “I’m a 100-percent candidate for upgrading my aging fleet, but at any time you are thinking of investing in your com-pany, you have to sit down with your accountant, determine where you are headed, do a good financial analysis, and make sure you get a good return on investment.” What she does is decide the type of equipment that makes the most sense for her company and market and then she researches the market extensively. At the same time she keeps up an ongoing dialogue with her lending in-stitutions. “That’s so once you find out what you want you have the financing under control,” Tucker said. “Other-wise, if you wait until the last minute to start the loan process, by the time you are finished with it, the good buy you hoped for has been snatched up by someone else.” And a good buy for Tucker doesn’t necessarily mean best price, but rather the equipment that careful planning has showed will do her the most good. For instance, she said, “We recently purchased a medium-duty B flatbed truck. We acquired that to expand our capability into the specific niche mar-ket of hauling heavier loads such as excavators and cleaners. With every-thing so tight, you need to be creative in what you buy.” The purchase of new equipment, Tucker said, “is so cost-prohibitive I’m postponing those purchases, but not indefinitely. I’m planning for the time when I can make those purchases.” See BUYING NEW OR USED?, page 3

Buying New Or Used?

Thomas G. Dolan

<br /> Current thinking on an age-old industry question<br /> <br /> Most towers consider an ongoing upgrading of their equipment a normal part of doing business. But the down economy has put a clunker into that aspect of standard operating procedure for most towers.<br /> <br /> “I think the trends throughout the industry are towers making do with less for longer,” said Stacey Tucker, owner, Chico Towing, Bremerton, WA. “They are putting money into repairs to keep equipment going longer, longer than was the case five to ten years ago.”<br /> <br /> Yet Tucker said that the poor economy “has also led to many towers trying to get out from under financial obligations by downsizing,” so that means there are some pretty good deals on used equipment out there. “Yet this doesn’t necessarily mean you should jump at the opportunity,” Tucker continued. “You have to be cautious not to obligate yourself without a certain level of breathing room for so many things in the economy can still happen unexpectedly.”<br /> <br /> “It’s very important you become conscious of not being ego-driven about buying equipment,” she added. “Buying equipment can make you feel proud and important, but that’s not a good reason for buying it.”<br /> <br /> A Good Return<br /> Tucker acknowledged that “I’m a 100-percent candidate for upgrading my aging fleet, but at any time you are thinking of investing in your company, you have to sit down with your accountant, determine where you are headed, do a good financial analysis, and make sure you get a good return on investment.”<br /> <br /> What she does is decide the type of equipment that makes the most sense for her company and market and then she researches the market extensively. At the same time she keeps up an ongoing dialogue with her lending institutions. “That’s so once you find out what you want you have the financing under control,” Tucker said. “Otherwise, if you wait until the last minute to start the loan process, by the time you are finished with it, the good buy you hoped for has been snatched up by someone else.”<br /> <br /> And a good buy for Tucker doesn’t necessarily mean best price, but rather the equipment that careful planning has showed will do her the most good. For instance, she said, “We recently purchased a medium-duty B flatbed truck. We acquired that to expand our capability into the specific niche market of hauling heavier loads such as excavators and cleaners. With everything so tight, you need to be creative in what you buy.”<br /> <br /> The purchase of new equipment, Tucker said, “is so cost-prohibitive I’m postponing those purchases, but not indefinitely. I’m planning for the time when I can make those purchases.”<br /> <br /> Similar sentiments were expressed by Phil Broyles, who owns Broyles Auto and Wrecking Service in Richmond, VA. “I’m still cautious with the economy the way it is, for I don’t feel we’re out of the woods yet,” he said. “There’s good financing to be had, but I’m an old-school kind of person and don’t like to stick my head out very far. Any equipment purchase has to justify itself.”<br /> <br /> Broyles said that, whereas Class 7 and 8 trucks are designed to run longer, he was in the habit of updating his smaller trucks every three to four years, but it’s now been five years.<br /> <br /> Intimately related to the issue of equipment is that of drivers, Broyles continued. “Our biggest mistake was in 2007 and 2008, when we kept everybody on,” he said. “We kept looking for it to get better next month and it never happened. We had some people just standing around all day long. We should have looked at it more from a business standpoint than employees being a part of the family. We had 22 employees, which have now dropped to 13 for people leaving for one reason or another. But we should have started laying off people earlier. We took three smaller trucks off the road and sold them.”<br /> <br /> On the other hand, Broyles said, “We’re busy now, so I’m more optimistic. We’re probably never going to get back to our 2006 revenues but we’ll probably have to hire some people and I’ve ordered a small truck, which is coming next month. So things are looking better.”<br /> <br /> Up With New<br /> Fred Scheler, owner of Henry’s Wrecker Service in Falls Church, VA, has a different take on buying equipment in that he’s interested only in purchasing new equipment, not used.<br /> <br /> “You should have a purchasing plan in place,” Scheler said. “Whether in any given year you’re scheduled to rotate a single truck, buy a handful, or buy a whole lot, that’s what you should stick to.”<br /> <br /> And it’s not because manufacturers are offering any special deals. According to Scheler, the cost of wrecker bodies has gone up in the past two years. “Everything is going up,” he said. In his opinion, it’s unlikely that towers will get any special discounts “unless you buy five, seven, or more trucks all at the same time.”<br /> <br /> Admittedly, this is an option for Scheler that is not available to most towers because Henry’s is a huge company. He added that manufacturers are not affected by the same interest rates from banks that towers are, but he feels the rates for towers are basically good at this time.<br /> <br /> But given the recent poor economy and the uncertainty of the future, isn’t it better to be cautious and purchase less-expensive used equipment rather than new? Scheler doesn’t think so. “There’s always the exception to the rule, but generally when you purchase used equipment you’re buying somebody else’s problem,” he said. “Anybody who gets rid of stuff does so for a reason. Maybe he’s downsizing so unloads what he finds is least useful to him, or he wants the cash to get something else.”<br /> <br /> Less Down Time<br /> Scheler acknowledged that each fleet is different and an owner’s decision has to be related to his individual circumstances. But, he said, “personally, when I look over my fleet, I look at the cost of maintenance and downtime on a truck over a year, and compare that to the going interest rates for a new truck. Now if I am paying $1200 a month on repairs and maintenance on an older truck, wouldn’t I rather be paying $1000 a month on a new truck, which shouldn’t have any down-time at all? If you have people doing two weeks of repairs on a truck while you’re still paying insurance on it, and it’s not running, it’s costing you money, not making you money.<br /> <br /> “If you have a truck out on a job and it breaks down, then you need to send a second truck out to complete the job, and still another truck to bring back the first one. That’s three trucks. That’s why I always purchase new equipment according to our business plan and not how the economy reacts.”<br /> <br /> In sum, there is no magic formula which can tell you when and how you should invest in equipment, whether new or used. But what you should do is analyze every aspect of your business and come up with a strategy that works best for you.

Towing & Recovery Footnotes
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