Is It Wise to Buy on Price?
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IHAVE been asked, and not for the first time, to advise an operator whether he should buy new vehicles on price—whether he should purchase that which is lowest in cost or spend a little more in the hope that the extra outlay will be justified by results. My usual reply is to recommend the inquirer in his purchases of all kinds to buy the best that he can afford.
In giving such advice, I am in difficulty at once because the inquirer may ask how he is to tell which is the best and whether I am suggesting that the more he pays for a vehicle the better it is bound to be. All things being equal, the more you pay the more likely you are to get value for
money. On the other hand, conditions of LjSC have a bearing onthe question and whe,reas one operator might find it worthwhile to buy only in the cheapest market and rely on frequent replacement to keep the fleet in working order, in the case of another this would be the worst possible course.
An operator wants -a machine that will run the maximum possible number of miles before it must be replaced. He wants to feel that during that vehicle's lifetime he will have the minimum of trouble. He wants his maintenance cost to be low and he wants to have no delays because of breakdowns on the road.
The question is whether the payment of sonic extra pounds or hundreds of pounds for the vehicle in the first place would be likely to ensure that the purchaser will have these requirements fulfilled. So far as its effect on the operating costs of the vehicle is concerned, the amount of the initial outlay is of comparatively minor significance. I appreciate that it must bulk large in the mind of the buyer at the time he is purchasing the vehicle, but apart from that it means little. There is only one of the 10 items of operating costs which is affected and that is "interest."
Interest and Depreciation
A curious point arises here. If it be accepted that interest is the only item affected, a number of operators would regard that as nothing, as there are many who do not accept interest as an item of operating cost. Most readers will be inclined to question the truth of that statement; they will ask if the item "depreciation" be not equally affected.
In view of what has been said about the user's requirements in a vehicle, the question of depreciation becomes of first importance. It is equally clear that depreciation should be considered as a running cost and be measured in miles and not in years.
Before going any further, it may be desirable to agree upon the prices I have in mind for the two types of vehicle, the low-priced and the high-priced. For a 6-7-tonner the prices in round figures may be assumed to be £1,000 and £1,800 respectively for the finished vehicle, painted, lettered and ready for the road. The first item to be considered is interest. Assessing that at 4 per cent. per annum, the debit
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against the low-priced machine would be £40 per year and that against the other £72. The difference, £32 per annum, is approximately,12s. per week.
Next take depreciation: It is reasonable to expect that, at the least, the life of the vehicle will be in proportion to its cost. In that case I. might take it that the low-priced machine will have a life of 100,000 miles and the highpriced 180,000, so that the figure for depreciation will be the same in both cases, 2.4d. per mile. • The Better Vehicle Now let me point out that even if it be that the vehicle will last for mileage directly proportional to its initial outlay, I he more expensive vehicle would still be the better. Other things being equal, the vehicle with the longest "life will spend less time in the repair shop. If a vehicle is to last 100,000 miles, from 75,000 miles onwards it will be rapidly approaching the time when it becomes so decrepit and is costing so much to maintain that the owner will want to dispose of it. Suppose we assume that similar conditions prevail in the case of the high-priced vehicle. It wilt approach its old age at 135,000 miles, compared with only 75,000 with the other. It follows that the tendency to give trouble is in inverse proportion to the initial outlay.
According to the experience of users, it is likely that the £1,800 machine will have a life of 200,000 miles if the figure of 100,000 miles be accepted in respect of the low-priced machine. The vehicle for which the operator pays £1,800 will last at least twice as long as the one for which he pays only £1,000. It is, of course, assumed that the conditions of operation of the two machines are alike. Taking it for granted that these figures apply, the debit on account of depreciation in respect of the more expensive machine is 2.I6d. per mile, as against 2.4d. for the other—quite a useful saving. A psychological point arises here. The buyer of a lowpriced machine, more often than not, purchases it with the idea at the back of his mind that he is going to work it hard, get the most he can out of it in its short life and then replace it by a new one. His attitude towards the machine is biased by that fact and he makes no determined attempt to ensure that the vehicle will last any longer than he feels it should. On the other hand, the buyer of a first-class machine who has paid a good price for it has the feeling that there is something which has cost him rather .a lot of money and that he must take particular care of it and make sure, that he gets his money's worth. That does not always happen, of course, but it is usually the case.
I can quote from experience relating to an operator of a medium-sized fleet who constantly bought low-priced vehicles and disposed of them within a year of purchase. (This, of course, is something which ha,ppened before vehicles were difficult to Obtain.) The annual mireage covered by these vehicles was 45,000 and the operator was of the opinion that he got the best value for money. He told me that bnce, by way of an experiment,' he kept the vehicles for 18 months before he sold them. The increased cost of maintenance, tyres, fuel and so on during the last six months of life was more than enough to offset what he saved on capital outlay.
Direct Saving
It may be useful at this juncture to assess the differences in depreciation as applied to the two vehicles in terms of a , year's work: If the annual mileage be 48,000, the depreciation of the low-priced Machine amounts to £480, as against £432 for the other. If the annual mileage be 24,000, the corresponding figures are £240 and £216, so that the direct saving resulting from the purchase of the betterclass machine is £24 per Annum for 24,000 miles per year and £48 per annum for 48,000 miles.
Against that. however, the £32 per annum difference in interest on first cost, which applies against the high, priced vehicle, must be set. Taking the two items together, the low-priced machine is more economical when running only 24.000 miles per annum to the extent of £8 per year. The two amounts, interest and depreciation, balance at 32,000 miles per annum and above that the saving accruing to the high-priced machine continues to increase as the mileage goes up.
There may not be much difference between the two vehicles in respect of expenditure on fuel and tyres, but do insist that, other things being equal, there will be
something to put to the credit of the more expensive vehicle. Almost every item of running cost will increase more rapidly in the case of the cheaper vehicle than with the other. It is impossible to suggest figures which are likely to be accurate, but I can at least indicate the differences which are to be anticipated in normal conditions of. use.
Let me take the cheaper type of vehicle first. Whatever figures are given are only approximate. So far as petrol consumption is concerned, it will in the beginning and if the vehicle has been run in be about 5 per cent. below average, rising gradually to the'average figure after about 6,000 miles. It will continue like that. assuming that there be, no accidental causes of waste, for a further 28,000 miles—after which it will begin to increase.
Parts of the chassis will be wearing, especially such things . as steering joints, shackle pins and so on. The wheels will not be running as true as they did in the beginning, whilst there will be more frictional resistance set up that will account for some slight increase in fuel consumption. The cylinder bores will be wearing and the engine will waste a little more petrol. fly the time 46,000-50,000 miles are indicated on,the speedometer, the petrol consumption will probably have risen to about 10 per cent, above the average: As regards the dearer machine, anti bearing in mind the point about the psychological effect of buying an expensive model, the corresponding figures are _likely to be about 5.. per cent. below average for the first 8,000 miles, remaining at that for the next 36,000 miles and increasing gradually to • 10. per cent, above average by the time about 60,000 miles are reached. . If the foregoing estimates be reduced to terms of expenditure per mile, it will be found that there is an actual saving in favour of the higher-priced machine of about 0.2d, per ,mile, That means if the mileage he 24,000 per annum, the saving will approximate to £20, more than discounting the extra cost of interest, In the case of oil consumption, of course, the variations will be much greater, at least if measured as percentages. Approximate figures are 40 per cent, below average in the case of. a new machine of any kind and 200 per cent, above average when the time comes for a major engine overhaul. For an inexpensive machine,,excesSive consumption may be expected by the time the vehicle has covered from 30.00036,000. miles. In the case of the more, expensive vehiele, the same condition may be expected to arise by the time the speedometer has reached 48,000-50,000 miles. .
There is not likely to...be much difference in cost per mile as the total cost of engine lubricants is small. 'There is however, a slight difference,.
Now, as to tyres. Here, other things being equal, a great difference in costs may be expected. Much more importance, by the way, applies to the expression, "other things being equal" when tyres are the subject of discussion. .A difference ill the care which is taken of the tyres, or in the way that the vehicle is driven has a tremendous effect on tyre expenditure. It will be easier if I deal fist with the ,more expensive chassis. This is usually better equipped as regard tyres, and it is a reasonable expectation that the cost per mile will be at least 10 per ccnt, and more probably 20725 per cent. below average. In the case of the cheaper machines,
tyres are not likely to be so good in the first place, and an increase in cost of about 35 per cent, above normal is to be expected.
There is still maintenance to be considered. So far as that is concerned, we have to appreciate that expenditure is of two kinds. On routine work (excluding washing and ing) there will be an increase. Routine-maintenanee operations may be required 'more frequently on the cheaper machine and the need for major overhauls comes more quickly. An increase of from 12-15 per cent, on cost may bd expectedcompared with average.
On the other hand,a better-class machine may not need so much to be spent_ on routine maintenance, whilst the 'times when major overhauls are necessary arise at much later periods. A saving of About 20 per cent, compared with average can be expected. • ,
Maintenance Considerations Finally, there is the time. lost while the vehicle is' undergoing overhauls and so on. It is extremely difficult to assess, but obviously it must be taken into consideration. A machine which costs more to maintain, and I have pointed out that that is likely to be the less expensive one is likely . to be in the shops for a greater percentage of its time than the one which costs more. The cheaper machine, -when nearing the end of, its life at about 100,000 miles, is more liable to involuntary stoppages on the' road. A more expensive machine reaches this stage only when the mileage it has covered is double that.
Roughly speaking, it can be stated that the more expensive type's liability to delays is only half that of the cheaper machine. Admittedly, a good deal of the above assessment is approximate almost to the point of being largely guesswork, hut the factors to be considered are set out although all or many of them may have to be ignored because of the conditions under which the vehicles are used.—S.T.R.