THE SITUATION: Team drivers Phil and Annett Albert recently faced a tough decision that’s all too common for owners of an aging truck: Overhaul the engine or trade the truck?
They’d been driving a 2008 Kenworth T660 with 1,350,000 miles, powered by a Cummins ISX. However, it needs an out-of-frame overhaul or a new rebuilt engine. With likely costs of $40,000 or more, they’re leaning towards trading. They’ve narrowed their shopping to a 2020 Peterbilt 579 with the Cummins X15 Efficiency series engine, 12-speed Endurant transmission and 3:08 rears. The truck is gently used with 250,000 miles at a sticker price of $110,000.
GARY’S FIX: The Alberts are in their early 60s, hoping to retire in four to six years. So it was tempting to let the KW be their “forever” truck and not be bothered with the expense of a much newer truck.
However, the T660’s maintenance and repair costs were $38,000 in 2019, $48,000 in 2020, so similar costs in 2021 plus the engine work would make for quite a high bill to swallow. Also, repairing the truck’s first-generation transmission had been very costly.
The hassles and costs associated with an overhaul or remanufactured “crate” engine aren’t always predictable. Either approach might not include certain components, such as an alternator, adding more costs. Some warranties have gotten more complex, which could mean getting less for your money than you expect, whether it’s an overhaul or full truck purchase.
Another consideration is downtime. Owner-operators tend to heavily weight this when they’re considering an overhaul. How many days will they be out? How accurate will that time estimate prove?
For the Alberts, it appeared they would lose exactly a week. That’s because of their arrangement to alternate weeks with Phil’s brother. They drive on mostly dedicated lanes to deliver salad dressing from their home near Spokane, Washington, to Michigan, then pick up dressing ingredients on the return. Phil’s brother handles the same routes on his weeks.
Another consideration was the depreciation that comes with paying $110,000 for a truck. It softens the long-terms costs, but in the Alberts’ case, it wasn’t a major factor.
So a surface estimate for buying the Pete instead of overhauling the KW’s engine was $70,000 – the difference between the $40,000 engine cost and the $110,000 truck price. Likely $70,000 is too high, since not only could the engine cost easily exceed $40,000 by 15% or 20%, but repair and maintenance costs on a 2020 truck should be much less than those on a 2008 model. Also, they’ll get around $15,000 from selling the T660. On the flip side, damage insurance will cost more on the Pete.
It was pretty clear that the likely costs for the Alberts to stick with their old truck were too high to justify. Other scenarios aren’t always so clear, but here are some considerations if you find yourself facing a tough decision:
- Your present situation – available cash and credit, debt level, years to retirement, lack of confidence in your current truck – might well narrow your options on trading or not.
- One goal in spending decisions is to keep your fixed costs per day at a comfortable level. Buying a new truck will likely increase your fixed costs more than an engine rebuild will. You don’t want to be pushed to run a lot of unprofitable miles just to generate cash flow to meet a truck note.
- For any major expenditure on an existing truck, ask yourself if it’s going to be a recurring problem. What’s the normal lifecycle of a component being replaced?
- Is more than one major component nearing the expiration of its lifecycle? For example, combining a transmission replacement and an engine in-frame can easily exceed the value of an old truck.
The Alberts felt confident in buying the Pete, partially because they had run a RigDig Truck History Report. I encouraged them to research it further, taking the VIN to a dealership to see if any further important information showed up, and to get an ECM readout for idle time and rpm. Such data can be excellent indicators of how the truck was routinely run. This case was ideal for in-depth background because the truck had only one owner, and its service had come only from the dealership that sold it.
Even though the Pete has only 250,000 miles, I recommended that the Alberts upgrade its diesel particulate filter to a Genuine Cummins DPF. It’s a crucial part and the original equipment model offers the lowest risk of failure.
I also recommended that since they’re moving to a truck with much newer technology and parking it for a week at a time, they should crank it two or three times during each idle period. With more computerization and aftertreatment that’s sometimes sensitive to condensation and a voltage drop, frequent starts can help maintain optimum condition.
The Alberts had done their homework and I was able to point out other small things, such as the need to form an exit plan now that they were looking at retirement. They mainly wanted to ensure they weren’t missing anything important – a little “truck therapy,” I call it – not a bad idea for anyone facing a big decision.
You can find more information about truck purchasing and maintenance considerations, taxes and more in the updated 2021 edition of the Overdrive’s Partners in Business manual for owner-operators and prospective owner-ops, sponsored by TBS Factoring Service and available for download via the link.