Guaranteed residuals revisited

PHILADELPHIA – Truck dealers may look to guaranteed residuals as a way to shore up future new truck business, though the strategy has been blamed on the recent glut of used trucks.

"Many individual dealers are looking to put their own buyback guarantee on the new trucks they sell in order to gain better control of their used truck market," explained Keith Ely, manager of Lawrence, KS-based Dixon Odom's dealer service group.

Dixon Odom, an accounting and consulting firm, is in the process of helping heavy-duty truck dealers develop business strategies for the future, and guaranteed residuals may come back into play a way to make the used truck market more viable.

"Dealers are looking to use guaranteed residuals to help drive how trucks are spec'd, with an eye to what kinds of specs sell well in the used market," Ely said at the American Truck Dealers convention.

According to Ely, the dealer would guarantee a fleet customer a certain trade in value on their truck as long as it is maintained properly and as long as it is spec'd a certain way. That would enable the dealer to offer customers a better deal on the front end of a new truck sale, while bolstering the residual value of that truck when it comes time to re-sell it on the used market, he explained.

"This is a big shift away from the way dealers have done business in the past and we are only just starting to see this trend develop," Ely noted. "Not all dealers are considering this by any means but we're seeing many consider it as a way to both win business and preserve business in the future."

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