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Young ones
Page 18
Page 19
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By driving down the age of its rolling stock, Dawson Rentals looks set to create a prime source of low-mileage, late-year vehicles. Steve Miller explains the advantages of
late-year vehicles to Kevin Swallow. The problems start, says Dawson Rentals managing director Steve Miller. when a vehicle reaches its fourth and fifth year on the books. Then repair and maintenance costs rocket. "We pushed towards having two and three-year-old stock in 2000. When we quote customers on contract hire the only thing that separates the price between three and five years is the higher cost of maintenance at five. While vehicles are reliable there is a definite increase in cost during the fourth and fifth years. We wanted to limit that expense," he says.
Updating Dawson Rentals' 9,000 assets is no mean task. The oldest of the 2,500-plus tractor units — the rest are trailers — are running on 04 and 54 plates and products are split evenly between contract hire and short-term rental.The company buys everything and backs it up with manufacturers' repair and maintenance deals.
The trucks are remarketed in their third year — but when it comes to used-vehicle sales, customers do not see Dawson Rentals as a vehicle supplier in terms of retail purchase. Producing more late-year vehicles for disposal was an opportunity not fully exploited by the company. "We didn't capitalise on it. We had a good brand, but weren't aggressive enough in the market, relying too much on the existing customer base rather than trying to expand it," says Miller. "We are trying toga our customers — and new ones — to consider us when they are thinking of buying something. There is a predetermined thought by a lot of operators that to buy a vehicle you have to go to the man ufacturer, or a used centre, and if it's rental they go to a rental company.
Growth in rental
"We have been selling trucks since before the 1970s through Volvo [when it first arrived] and we started renting trucks in .1974," he says. "When Volvo arrived people wanted to try the truck before they bought it,so there was growth in rental and we expanded off the back of the Volvo brand."
Expanding the Dawson Rentals used division is not an ad hoc process, it is more opportunistic and based on maximising financial return."11 can make more money renting it than selling it I'll carry on renting it. It is done on a more individual basis. We choose when we sell something; we don't have a date in time for when something must be sold, we maintain control of our assets.
When someone phones looking for a particular vehicle, we can look at the asset register, negotiate a price. Sometimes it means pulling a vehicle from a customer and giving them anew vehicle. It means selling the vehicles perhaps no one else would have sold." says Miller.
Spanner in the works
Digital tachograph legislation threatened to throw a spanner in the works, especially as Dawson Rentals had already purchased 1,256 new trucks at the end of the Euro-3Ianalogue deadlines, which almost meant stockpiling. "That was how it turned out, but it wasn't the intention. That did catch me out: we were buying vehicles when the truck rental scene was going quiet — 2006 was not very good for the truck business," says Miller.
Training and support on digital tachographs helped jump-start replacement programmes and with its commitment to purchasing, Dawson Rentals is able to offer the market prime late-year stock. "Residual values for 2006/ Euro-3 stock strengthened. It is good for accountants and largely down to manufacturers putting their prices up.There is a big gap on new vehicles making used [two-to-three-yearold stock] attractive against purchasing new."
As UK operators stalled, European truck manufacturers took the opportunity to supply east towards and into Russia. "We felt it,customers were stalling things and were uncertain with the economy.There were a lot ofpotential orders, but no one was putting pen to paper. UK operators waited too long and by the time they got back into the market the trucks were going east.
"The Eastern European and Russian markets were so busy manufacturers saw an opportunity. restricted [British-bound] vehicles and put prices up. We are being squee7ed and it's a bitter pill, with fuel prices as high as they are, we are asked to pay more. Dawson Rentals buys the truck and works out a rate based on that capital. It filters down to the customer ultimately," says Miller.
"Those vehicles have put us in a prime position today.We'll sell vehicles that are only a year old. If someone can't buy a new vehicle today and they want to buy some from the rental fleet with a year's life out of it. we'll sell at the right price. We are reacting to the market."
Contract hire
That purchasing programme has not abated. This year there will be 1,000 new trucks coming from Mercedes and Sweden and 1,000 new trailers to support growth and replacement cycles. Most of the new trucks will be pushed into contract hire.
"That is where the money is made. In the short term you can never charge enough to counter the downtime. We have got trucks coming in every month for this year. We know how many vehicles we can release, I'm constantly assessing the balance of what we are buying and selling. I won't sell too many," says Miller.
With manufacturers raising prices, Dawson Rentals has entered into a chicken-and-egg situation that should see it benefit from having new stock for customers and meeting late-year with better residuals.
By adopting a two-year shelf life for tractor units, Miller is keen to reduce outgoing costs. "The advantage of two-year-old products is that we want an easy life and want the customers to have an easy life, and easy transactions with Dawson Rentals.
"Years ago, customers didn't have that. We have got great strength and knowledge of what we have being doing for the past 30 years. If we can offer the customer vehicles that are swapped regularly without the maintenance issues at a reasonable price, everybody has got to be happy about that." •