COVID Cost Control: Avoid these three mistakes when liquidating assets

If your industry and business have been severely impacted by the pandemic, you may be facing difficult decisions involving your fleet as you work to overcome trying economic conditions. If you’re faced with decreased demand or halted operations, this is the time to remain agile and look for creative solutions to help sustain your business now without sacrificing future success.

When revenues are down and cash flow has slowed, selling some of your vehicles and equipment is a plausible, short-term option for reducing your fixed expenses and generating much needed capital. If you are ready to create a plan, you need to determine how to choose which vehicles and equipment will go, and make certain you’re prepared for the long-term effects.

Are you asking the right questions to achieve your goals?

Your strategy for liquidating your vehicle and equipment inventory should address two key goals: to eliminate a portion of your operating expenses, and to maximize returns. However, there’s a third factor to keep in mind as well – be mindful of inadvertently driving up operating costs associated with aged vehicles.

As you look to reduce your fleet size, you’ll want to avoid shifting too much of your operational burden onto your older, more costly assets. Here are three common mistakes to avoid, and three questions to ask instead.

AVOID: Selling vehicles that are still useful to your business in the long run.

ASK: How often are the vehicles DRIVEN?

Vehicles that are in high demand are likely helping you generate revenue. You don’t want to interrupt that prosperity, so if you have to dispose of active vehicles, go for the older or higher mileage vehicles and equipment that are utilized less.

Since these older units are no longer operating in prime condition, they are likely incurring higher expenses for fuel and maintenance compared to newer, more efficient vehicles. Cut those excess costs by retiring these units, particularly those in a positive equity position.

AVOID: Finding your fleet shorthanded when business ramps up.

ASK: How soon will DEMAND rebound?

Before prioritizing any vehicles or equipment for resale, consider when your company will feel any pain associated with selling these units. Although a lot of uncertainty remains, try to anticipate how quickly demand may ramp up once economic conditions begin to improve. You don’t want to be caught shorthanded. In some cases, you may want to consider parking certain vehicles and equipment instead of selling them. Temporarily parking your higher-cost assets can help lower operating costs without reducing your inventory, ensuring you have vehicles ready as business returns to normal.

AVOID: Selling quickly without a value-based strategy.

ASK: How many DOLLARS can you recoup?

You can reduce fixed expenses by selling leased vehicles if their resale value exceeds the amount owed. Also, selling owned assets is an easy way to generate cash from sale proceeds. You should look for a resale partner with expertise in assessing the current used vehicle market to help determine the value of your vehicles and equipment, especially when conditions are highly disrupted like they are right now.

Most importantly – ask for help

If you’re not sure where to start, or if you’ve complied an initial list of assets for potential sale, ARI can help. We can advise which vehicles and equipment can yield the greatest returns in light of current market trends, and help you explore strategies for your specific needs, including quick asset liquidation for immediate cash infusion when you need it most.

As your organization continues to adapt and respond to the uncertainty of COVID-19, let us help you explore creative ways to streamline your operating costs in a way that works for your unique circumstances, and ultimately position your business for a brighter tomorrow. You can sign up for daily COVID-19 updates delivered to your inbox, and stay tuned to our blog and COVID Resource Center for more information on the used vehicle market.