By Dave Millhouser

"You wont believe what I found!" JR exclaimed breathlessly.

"A guy sold me a gold Rolex for only $350."

The watch WAS beautiful, but it had a minor flaw . . . the logo on the dial said "RoMex." Suddenly, the under-priced watch was not like money in the bank.

Sometimes we make an assumption about the value of things based on incomplete information, and other times values change dramatically because of events beyond our control.

For many years motorcoach companies in the U.S. operated on a unique business model. The buses they operated were extremely well built and had service lives approaching 20 years. You would buy a coach, run its wheels off, and sell it several years later for nearly the purchase price. You might not run it 20 years but the price it commanded in the used market relied on it being useful for that long.

Back then, many operators were willing to "turn wheels" for little or no profit. They knew that when they sold the coach for far more than its depreciated value the return from the sale would be their profit. A bus was like money in the bank, and family fortunes were built on them.

In the 1990s this all began to change. Manufacturers needed to sell more buses, so they built stock units and began discounting to move them. Financing was readily available and cheap, so operators who had been buying used now bought new. We, as an industry began selling the public on riding new buses, despite the fact that a 20-year-useful life was critical to our business model.

A customer once told me he was insulted by my companys low offer on his trade. And, that he was glad wed finally been forced to offer discounts on the new coach. He missed the connection between new bus pricing, and the residual value of used equipment.

Why buy an expensive used coach if a discounted new one is only a few dollars more?

European coach operators have taken a different tack, and it appears we are moving in that direction. Used coach values matter to them -- but not as much. It's a different environment, and they are able to get higher prices for running trips, making an operating profit. This gives them a bit more control of their destiny.

As you consider equipment purchases, and plan for the future, its important to give thought to what part residual values will play and what forces may influence them.

Obviously, the quality of the coach and the manufacturers support network are critical. A well-built bus ages well. Some models are designed for a shorter life and theres nothing wrong with that -- IF you account for its impact on resale.

Some finance companies are struggling with a glut of repossessions. This impacts residual value in at least two ways. They tend to accept lower prices for these coaches, just to blow them out (and, remember, your used buses are competing with theirs).

In addition, once burned, finance companies are reluctant to fund used-coach purchases without big down payments. The person youre trying to sell your coaches to may not be able to come up with the down-payment money. Thats one reason why trading to a manufacturer at wholesale can make sense.

New brands of coaches have been introduced in recent years. The U.S. market is small and the economy is ugly. Some current players may not survive.

When GM, Eagle, Neoplan, Irizar and Dina departed the field, the value of those products dropped dramatically. The fiscal health of a coachs manufacturer will have a significant impact on its long-term value.

Drive trains matter. Some model years are perceived as being better than others, so buses equipped with a particular engine or transmission may hold their value better. Extended warranties are a plus.

Conversely, if a major component builder leaves the field, coaches equipped with their product lose ground. Some, for instance, are worried about the potential impact of Caterpillar pulling out of the on-highway market. Cat says it will continue to support its engines, but will its dealers?

One of the benefits of buying new equipment now is that in a few years you may benefit from the current down market. In 2015, a buyer looking for a five-year-old coach may have very few to choose from. If you need equipment, and choose the right bus, now might be a good time to buy.

Conversely, a well-maintained coach can look good (and operate well) for years.

One enterprising operator managed to keep his passengers from questioning his buses age by taping over the model year on the builders plate. His coaches were immaculate, and he got away with it until he was ready to sell -- for a fair price.

Masking tape is inexpensive and effective.

Dave Millhouser is a bus industry marketing consultant and freelance writer. Contact him at: dave_millhouser@hotmail.com.