Keep Your Fleet As New
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The Cost involved in Keeping Old Vehicles Can Ruin a Haulier Not Only Because of Expensive Overhauls and Repairs, but Also Because they Earn No Money when they are Off the Road Although their Overhead Charges Continue to be Borne
WHATEVER may be the truth of some of the stories about the state of vehicles which are being acquired from the Disposal Board, there is one fact which cannot be disputed: they are all us4d, and on that account are bound to bear the scars of wounds suffered at the hands of their former owners.
It used to be said that to buy used vehicles was to buy trouble; the fact that these machines are, or were, Government property does not necessarily mean that they are, as used vehicles, in a class by themselves. It is the way in which they were driven during their life as Government property that determines their condition, and that may be anything frOm very good to very bad. All operators are subject to that condition; they and their vehicles are in the hands of their drivers. What must still be borne in mind is that the best of the machines are nevertheless used, and bring.with them all the possibility of trouble.
Sell Immediately Arising out of that is a .problem of long standing, one which has never been satisfactorily solved, notwithstanding the many efforts to arrive at a solution. It is when the haulier should discard hii old vehicles and buy new. In some cases, when the haulier has made his purchases from the Board, the.-problem will arise at. once. Hauliers who believe in keeping their fleet up to date will almost immediately begin to sell their newly acquired vehicles and replace them by new.
Some 4spects of these sales of British Road Services vehicles are curious and unprecedented. A substantial minority of the buyers is almost uninterested in the condition of the 1,ehicles; they have bought so that they can get hold of the licences. The vehicles and their
condition are matters of no great concern. Many, A36 however, will not have the financial resources to allow them to treat the matter in that way. They will want some service out of the machines before they replace them. They are thus faced with the problem of selling at once or later. .
The question is analagous to the one I dealt with a short time ago. In the issue dated February 12, 1954, I pointed out that if a chassis -were to be fitted with an Oil engine in place of a petrol engine, thetime to do it was now, as every mile run on petrol was wasting money .which could be saved by the conversion. The same reasoning might be used in respect of the intention to sell an old vehicle and replace it. Do it now. If the machine is in such a state that replacement is desirable, the operator is losing money for every moment of delay, Obtaining Spares
The topic, however, is controversial, and it may well be that a discussion of it here would be helpful to some unit buyers. Perhaps I should begin by relating a story. I called on a haulier, following a letter I had received from him concerning some rates for a contract he had been offered. I found him busily engaged repairing one of two broken-down lorries. A third vehicle was there, too, partly dismantled, awaiting, as I subsequently discovered, the acquisition of some spares which were hard to get. The machine was• an old model. A fourth vehicle was there, too, but idle.
It transpired that one of the two broken-down machines had stopped on the road. The second machine had been sent out to tow it in and had itself broken down.. Another vehicle had to be requisitioned to bring in thepairof them. That machine was, at the time of my visit, completing the contract on which the first one had broken down. The fleet totalled five old, worn machines, fit only for the scrap heap. At least, that was my opinion. It was not that of the owner, who was obviously proud of them, and insisted that they gave him good service, notwithstanding the fact, disclosed in conversation, that he was accustomed to troubles of the kind I was then witnessing.
Let us examine the financial aspect of these breakdowns. Here are three lorries, all idle-one for a couple of days, one for four days and one for a week. Two days would have been enough to repair any one cif them, but there were only facilities and staff to deal with one of them at a time. The standing charges of the whole establishment are going on all the time, as well as the establishment costs and, above all, there is the loss of profit for four vehicles.
Let me go into figures. I was told that each of the vehicles was earning £36 per week and running exactly ten times that number of miles; each earned 2s. per mile, which would be good if there were no hold-ups. .
Standing Charges The standing charges of such vehicles, according to "The Commercial Motor' Tables of Operating Costs," amount to .E9 7s. Establishment costs per vehicle can be assessed at £2 13s per week so that the sum of fixed costs is £12. Of the running costs, we need consider only depreciation at about 2d. per mile. That is £3 per week. The driver will no doubt be found work to do in the garage so that only a part of his wages is lost:say one quarter, about 35s. per week. By that I mean that the work he is doing is worth only three-quarters of the amount he would normally receive as driver.
While a vehicle is off the road, the following items of expenditure run on and are lost. for each week of the time the vehicle is under repair; tax, 12s.: levy, 3s.; wages (one quarter), £1 15s.; garage rent. 9s. 5d.; insurance, 15s.; interest, I Is. 7d.: establishment costs, £2 13s.; depreciation (part only, that which is attributable to obsolescence), £3; profit, £9. The total is £18 19s.
There are probably incidentals to add, and it is reasonably accurate to state that this haulier is losing £20 per week in respect of every vehicle which is off the road. At the time of my visit, therefore, he was losing £80 a week. He was that amount poorer than he would have been had he owned lorries in good order, and sufficiently, up to date to ensure that spares would be available. If that happens half-a-dozen times in a year, the loss amounts to £480 per annum.
Out of the Question I am not going to pretend that I think it possible for :very haulier to invest in new lorries at the outset. I know tat it is out of the question in many cases, even with hiresurchase terms. I do think, hoWever, that hauliers should segin to think about buying new machines sooner than they Jo, and I am quite sure that it is far more profitable to have i couple of good lorries than five or six which are always giving trouble, and which do only, all told, the same work as :ould be done by a couple of efficient machines.
Six used 5-tonners could be bought today-1 am not
.eferring to purchases from the Disposal Board-for about 1.200. That sum would buy one new lorry outright and ford a substantial deposit on a second to be acquired
inder a hire-purchase agreement.
The yearly cost of running six old lorries, assuming that ive only are being operated, and that, on the average, three inly are at work throughout the year, works out as follows 50 weeks to the year): licences and levy. £220 10s.; wages, 2,100; garage rent, £150; insurance, £240; interest, 148. "otal of standing charges: £2,758 10s. It should be noted hat all items, licences, rent and rates, insurance premiums nd interest, have to be calculated for six machines, although ■ nly five are in regular use, as any one of the six must e ready to go on the road as substitute for another, broken Own.
Now for running costs. About six hundred miles per eek will be the average for the whole fleet. The cost per site viii inevitably be higher than those given in the Tables because the '.chides are nos in good condition: 10d. per mile will he the minimum, and the total for the year, £1,250.
Altogether, the haulier will have six more or less dilapidated lorries and must spend practically £4,000 a year on them, persuading them to run 600 miles per week. For £4,000 he gets a mileage of 30,000, so that each mile costs him 2s. 8d.
Assuming that his establishment expenses are £360 per annum, which is about the least they can be, also that he expects to make £1,000 a year only as net profit, each year he must earn at the rate of 3s. 7d. per mile. I will leave that figure with no comment, only suggesting that every reader should ask himself how many miles a year lie will run and get payment at that rate
New Vehicles' Costs
Let us now examine the case of the man with two practically new vehicles of the same type and size. His expenses are: licences. £73 10s.; wages, £700; rent and rates, 1.50; insurance, £80; interest, £48. Total of standing charges, £951 10s.
His running costs shotild be less than the amounts set down in the Tables, because he will be operating modern and well-kept machines. Instead Of 10d. per mile being the minimum, it will in all probability be 9d., and that will for some time be the maximum. The 600 miles will easily he run each week between the two of them. At 9d. per mile that adds up to a total of running costs per annum of 11.125. His total operating costs per annum will work out to only 16.6d. per mile, against 2s. 8d.
Take it that his establishment costs are the same, £360, and if he wants £564 a year profit his revenue per year needs to be no more than £3,000. To get £3,000 for 30,000 miles he must charge only 2s. per mile as against the 3s. 7d, of the man with six poor vehicles.
Even if I make alloWance for hire-purchase payments on the cost of the second lorry, amounting to £50 per month, that adds only 5d. to the essential revenue per mile; or, if that return is out of the question, he must go short to that extent of his profit for the 18 months over which the transaction most run.
Great Mortality
This reminds me of something I once read in an American magazine dealing with the problem of hire purchase in its relation to the operating problems of buyers. Each operator, it said, "passed out when he had to replace his equipment." The writer said that the mortality among small hauliers was great .and was partly because of the folly of rate-cutting and the use of unsuitable, vehicles: The one brings about the other.
In 'our case, the six used vehicles, decrepit today, will be useless in a year or so. Their owner, working at a loss all the time, will be unable to replace them because they have, not earned him enough to enable him to live and make his way. He will, therefore, as the American 'put it, " pass out." The two new lorries, however, doing only 30,000 miles per annum between them, will be good 10 years hence, while the owner, working all the time on a real and not fancied profit, will not be nonplussed when he realizes that they will shortly require renewing. Hewill know that his future will be secure because he is going on the same way as before, with reasonably new vehicles and a schedule of rates which really shows him a profit.
That is the moral of this story and the answer to the question which it asks. The time to buy new vehicles is shortly before they begin to be a burden.
One way of deciding this question is that the period of useful life of a vehicle be measured by the life of the engine. Assuming that the engine is replaced when its overhaul is needed, the chassis itself ought to be replaced after three engines have been fitted, that is when the time arrives for the fitting of the fourth reconditioned engine.
That would apply to a petrol engine. If the vehicle is an oiler, the chassis needs renewing at the end of the life of the second engine. S.T.R.