A truck is usually compared on its repayment. That is understandable, since it is the figure on the quote. But repayments typically make up only part of what a heavy vehicle costs to own, and the rest turns up in places that are easy to underestimate.
What total cost of ownership means
Total cost of ownership (TCO) is every cost of owning and running a vehicle across the time you keep it, less what it sells for at the end. It lets you compare two trucks, or a truck against a different option, on the same footing.
The costs that get missed
| Cost | Type | Often overlooked because |
|---|---|---|
| Finance repayments and fees | Fixed | Usually the only number on the quote |
| Balloon or residual | End of term | It sits outside the monthly repayment |
| Fuel | Variable | Differences between models compound over many kilometres |
| Tyres | Variable | Spread across the year, so no single big invoice |
| Servicing and repairs | Variable | Depends on age and warranty cover |
| Registration, insurance, tolls | Fixed and variable | Bundled into general overheads |
| Downtime | Hidden | Never appears on an invoice |
| Resale value | Offset | Uncertain until you sell |
Fuel and tyres add up faster than you expect
On a truck covering long distances, small differences in fuel use matter. A model that burns a little less per hundred kilometres can make up a meaningful part of a repayment difference over several years. The same goes for tyres: spec, load and road conditions all change how quickly they wear.
Ask your dealer for real-world consumption figures where you can, and compare them with your own records. Brochure numbers rarely match work in the field.
Downtime is the cost nobody invoices
A day off the road costs what that truck would have earned. If a replacement unit has to be hired in, there is a direct cost as well. This is one of the strongest arguments for a newer vehicle with a warranty, and for a sensible maintenance schedule on an older one.
Resale and the balloon
The residual or balloon in your finance is a guess at what the truck will be worth at the end of term. If the market value ends up below it, you carry the gap. If it ends up above, you have equity. Conservative assumptions tend to leave fewer surprises. A lower balloon means higher repayments now, but less exposure at the end.
A worked comparison
Consider two trucks as an illustration. Truck A is cheaper to buy but uses more fuel and has a shorter warranty. Truck B costs more upfront and has higher repayments, but its fuel use is lower and early-life repairs are covered. Over a five-year horizon, B can come out ahead or behind depending on the distances you run and how quickly each loses value. The only way to know is to run the figures with your own kilometres, your own fuel price and your own downtime costs.
Using TCO when you finance
Once you know your running costs, you can choose a term and balloon that suit cash flow rather than whatever the default quote offers. Truck finance and trailer finance can be arranged together or separately, and for several units fleet finance may simplify things. Terms and approval are subject to lender assessment.
The Australian Bureau of Statistics publishes data on freight and road transport that can help with benchmarking, though your own records will always be the most reliable starting point.
Build a one page TCO sheet
You do not need specialised software. A single page per truck, updated quarterly, will do the job. Keep it simple enough that you will actually maintain it.
| Item | What to record |
|---|---|
| Purchase | Price, deposit, finance amount, term, balloon |
| Running costs | Fuel, tyres, servicing, repairs, each quarter |
| Fixed costs | Registration, insurance, finance repayments |
| Downtime | Days off the road and the cost of each |
| Kilometres | Total for the quarter, so you can work out cost per kilometre |
After a few quarters you will have your own figures to set against the brochure claims. Cost per kilometre is a particularly useful measure, because it lets you compare trucks of different ages and uses on the same basis.
Mistakes to avoid
- Using the first year as typical. New trucks often look cheap to run early because of warranty cover. Costs tend to rise later.
- Ignoring the balloon. A low repayment can hide a large amount owing at the end.
- Leaving out downtime. It is the hardest cost to measure and often the most expensive.
- Comparing different kilometres. A truck that does half the distance will look cheaper to run. Compare cost per kilometre.
- Assuming resale will match the balloon. If resale falls short, you carry the difference.
None of these are complicated, but they are easy to overlook when you are busy. A short review every quarter keeps them in view.
Using TCO in negotiations
Once you know your own running costs, you can ask suppliers sharper questions. Ask what service intervals are recommended and what they cost. Ask for fuel figures from operators doing similar work. Ask what the supplier would offer for your trade-in and on what basis it is valued. A supplier who can answer these clearly is usually easier to work with over the life of the truck.
It also helps with finance. When you can explain how the truck will earn its keep, a lender has a clearer view of your application, and you are better placed to choose a term and balloon that match the way you operate.
Frequently asked questions
What is a good way to start tracking TCO?
Begin with the last 12 months of fuel, tyre, service and repair invoices for each truck, plus any days lost to breakdowns.
Is the cheapest truck to buy ever the cheapest to own?
It can be, particularly for low-kilometre work. For high-utilisation trucks, running costs often outweigh purchase price differences.
How long should I use for the comparison?
The time you plan to keep the truck. Many operators use three to five years, but your own replacement cycle should guide you.
Does the finance structure affect TCO?
Yes. Term, rate type, fees and balloon all change the total you pay over the life of the agreement.
Next step
If you are weighing up two trucks, send us the quotes and your annual kilometres and we will help you compare them on total cost. Contact TYG Finance or call 1300 894 894.
General information only. Finance is subject to lender approval, and results vary based on individual circumstances.
