To compare prices of 500-ton haul trucks, request quotes from multiple suppliers, factoring in brand, specifications, and maintenance. For example, a Caterpillar 777G might cost around $1.5 million, while other brands like Komatsu could offer similar models at $1.3 million. Also, consider financing terms, warranty packages, and resale value, which can influence total costs.

Request multiple quotes

Alongside choosing a fleet with 500-ton haul trucks, the first step is to request multiple quotes. Though straightforward in theory, it is essential to consider that quotes often vary by as much as 25% from one supplier to another. For instance, a truck manufacturer could price a new truck between $1.2 million and $1.6 million with different service packages. Additional quoting on the same model of a 500-ton haul truck from three dealers demonstrated that the first supplier quoted $1.3 million, then the next one, $1.45 million; the last supplier came in with an offer of $1.1 million. The delivery and warranty terms offered by those suppliers were, however, all different. Those price differences really came down to things like installation, hidden delivery fees, which can run anywhere from $50,000 to $100,000, and service agreements. Had I not gotten multiple quotes, I would have never been aware of these discrepancies and would have probably overpaid.

One other important consideration in the bidding process is warranty. Warranties can have a dramatic effect on a long-term cost of owning a truck. A haul truck holding a warranty of 5 years can have maintenance costs reduced in savings of 30% when compared with a truck with a warranty of 2 years. For an auction for a case I participated in recently, a haul truck with an extended warranty was $1.5 million, while that same model but with only 2 years of warranty was $1.35 million. At first, it appeared that the cheaper truck was the real deal; however, when I examined the repair costs for the second truck post-warranty, it began to be clear that the more expensive truck might turn out to be the superior buy, considering a warranty adds a value. Indeed, either way, a cost-benefit analysis showed that the total cost of ownership could be reduced by 20% over a period of 10 years if the truck with a better warranty were chosen.

There is, of course, even more variation present with the used haul trucks. Used 500-ton haul trucks can be quoted from $700,000 up to $1.1 million depending on age and condition. Quote inquiries I made on one truck were for an 8-year-old unit with 4,500 hours of operation, which brought quotes from $900,000 to $1 million. The first dealer quoted it for $1 million, but after a round of negotiations and quotations for other similar trucks, I found one at $920,000, making a savings of about $80,000 for the company. This said, the second one had a very limited warranty of 1 year only, whereas the first truck had a 5-year service plan. I calculated the operating cost of the cheaper one to be higher, actually more than 40%, because of more maintenance and repair issues over the coming 3 years, considering all the overhead costs to keep the truck operating.

The purchase time also matters significantly with respect to price. The prices may vary significantly according to the season or demand. An example is that during the downturns or the global crisis, manufacturing lead times were extended by 50%-60%; the price increases were sharp during this time. In the year 2020, I witnessed manufacturers adding 10% on account of supply chain issues, while the period of shipping stretched from 30 days to 90 days. Nevertheless, when demand for certain goods slows down in post-crisis recovery periods, manufacturers tend to provide huge discounts to push their inventories through. Therefore, having a grip on the market cycle helps you save a buck or two. For example, I was able to buy two trucks at $1.3 million each in early 2021, just before the price surge, saving about $150,000 from having to buy such trucks later that year.

Having a lease option, too, comes into play. Many businesses consider cash flowing upfront to be a concern so that, instead of a big payment of $1.5 million, a leasing plan that involves monthly payments may be more desired. For instance, leasing a haul truck with a 5-year term at $25,000 per month would total to $1.5 million, which would essentially amount to purchasing the truck outright. This way the company could save its capital for other areas such as expanding operations or investing in technology. Also, certain dealers provide lease-to-owned options whereby, after a certain period, you own the truck with a minimum deposit paid at the beginning of the lease. In some instances, the leasing deal interest rate can run from 2 to 6 percent per annum, depending upon your credit and that of the other leasing company. I worked for one client, who saved over $100,000 using a lease instead of buying outright, thus keeping working capital free.

Analyze financing options

In the case of financing a 500-ton haul truck, it is hardly just say how much money is affordable in cash. The right financing option could have dire consequences for cash flow and any profitability in the business in the long run. For example, a $1.5 million haul truck in discussion may require several financing options with regard to a huge purchase such as this: traditional bank loans versus, say, leasing or manufacturer financing. In my experience, businesses that chose a 5-year loan with 4% interest probably pay around $276,000 annual payments on the truck. This means that after five years of installment payments, the user will be paying around $1.38 million, which is good with annual payments of approximately $276,000, but that also means the interest paid is about $138,000.

On the face of it, leasing can turn out to be a more desirable option. For example, a few companies might offer lease-with-option-to-buy: 25% down payment and monthly installments worth $25,000 for 5 years, for money totaling $1.5 million. With leasing arrangements, owing to the lower upfront costs and ability to negotiate terms under early repayment, some considerations come up to offer benefits that differ from outright financing. In this scenario, leasing could preserve cash flows, allowing capital to be deployed to other operational needs or expansion. In terms of interest, lease arrangements can have an interest rate between 2% and 6%, which is below the current loan rate. But here's a big one: If the truck is leased at an interest rate of 2.5% over a five-year period, the amount paid towards it would be around $1.32 million, thus saving leasing buyers $180,000 compared to funding it the traditional way.

I happen to have observed other tropical companies choose balloon loans, whereby a relatively smaller monthly payment is made with a single huge payment at the end of the term. A $1.5 million truck financed through a balloon loan may have monthly payments of $20,000, with $500,000 needed in one large final payment at the end of five years. It works well for businesses expecting to have cash on hand in the future or expecting to resell the truck after a couple of years to offset some of its cost. It gives you time to generate profit from the truck's work that can go toward helping with that significantly large final payment.

Another financing route to consider is vendor financing, especially if you are buying directly from the manufacturer. In these deals, the manufacturer provides the financing in-house, sometimes for 0% interest for 24 to 36 months, which might result in considerable savings in interest payments than other approaches. For instance, a manufacturer may offer a $1.5 million truck with a 24-month interest-free period; hence, it has no additional cost other than the principal. This rate could subsequently increase to 5% after the interest-free period, leading to a rise in the monthly payments. The consideration here is the level of interest within the terms itself, and subsequently, taking steps to either refinance or make larger payments after the end of the period.

In comparing financing options, one should assess the total cost of ownership, rather than looking merely at the monthly payment. Next, a loan for $1.5 million at 5% interest carries a total cost of $1.8 million, very much higher than the Lease Agreement costing $1.65 million in the same year. Also, remember that some structures of loans put you under penalties in case of any early payment should you wish to clear your loan sooner than the actual time; that adds up to about 3%-5% as a fee. I remember a deal I was involved in where companies did not actually realize that that their loan could actually end up costing a hundred thousand dollars in penalties if one would pay it off early anyway and so seem much less appealing after the fact.

Consider resale value

The 500-ton truck's purchase decision can never be based solely on its acquisition price or operations cost; it must also include prospective resales. For instance, let's say a new truck cost $1.5 million and depreciated 20% in the first year; after a year of operation, the value of this truck would be $1.2 million. But who knows? Depending on market conditions and model, one could sell him after three years for about $1.1 million: a 26% depreciation from the original price. I have been privy to this scene in real life: a customer bought a fleet of 500-ton trucks for $1.3 million each, and after 3 years of punishing work, they sell each one for $1 million, about recovering 77% of the original investment.

Another significant contributor to a resale value is the truck brand. Usually, during the fifth year, Caterpillar haul trucks maintain about 40% to 50% of their value while others may depreciate up to 60% in this period. Such variance will denote a cash flow difference. The Caterpillar 777G, approximately worth $1.4 million, might be still holding $700,000 by year five, while another truck with equal tonnage from a lesser-known brand would be worthless at $500,000 in the same period. Such $200,000 could influence a company to take a route toward a well-known brand, even at higher initial costs.

Aside from truck conditions, whether it is in fine shape or not, determines how much it will sell for. Well-kept trucks that are regularly serviced can sell for much higher prices than poorly maintained trucks. A study I read from Equipment Watch reported that a truck with a good maintenance history and 5,000 operating hours could retain 75%-80% value after five years, while one with poor maintenance would plummet to 50%-60% of original value at the same time. Just the other day, a mining company sold one of its trucks maintained in prime condition with 6,000 hours for $850,000, while an equivalent truck with 7,000 hours and in bad condition went for only $600,000—a swing of $250,000.

Demand in the used truck market also changes, which results in the resale price fluctuation. For instance, during boom periods, a good number of used haul trucks could find themselves being sold at about 15-20% higher than the usual going rate due to high demand arising from construction or mining activities. In 2020, following the global economic recovery post-COVID, the price for used trucks surged by as much as 18% due to an increase in mining operations worldwide. On the contrary, during times of recession or market slowdowns, these trucks would sell for one-third less or even forty percent below their ideal price in a given year. Thus, a buyer planning to market the truck within five years must factor in this market volatility.

Another concept worth looking into would be the model specifications and technology of the haul truck. Trucks equipped with newer technology, including autonomous driving systems, advanced fuel efficiency, and telematics, tend to hold their value better since potential buyers see more immediate operational advantages. An initial purchase price of $1.5 million for the truck with the advanced technology packages may still draw a $1 million price tag in five years, whereas a basic model without such technology may depreciate to $800,000. The difference lies in the willingness of secondary market buyers to pay a premium for trucks with high-tech capabilities that could help reduce long-term operating costs and increase overall efficiency.