With the manufacturing of trucks equipped with pre-October engines now over, the industry is turning its attention from the pre-buy of trucks to the uncertain demand for new-technology power units. Although a new truck with older technology is no longer an option – at least not in a few weeks – buying used remains an alternative.
A high demand for good used trucks should come as no surprise. Indeed, concerns with exhaust gas recirculation (EGR) technology and an inevitable rebalancing of supply and demand have led to a significant firming of used truck values during the year and a developing shortage of trucks deemed to be most desirable.
Higher values
Terry Williams, editor of the Truck Blue Book, saw used truck prices rising beginning in February, especially for late-model, low-mileage on-highway tractors. On average, such trucks with owner-operator specs are up about $20,000, while fleet-spec’ed equipment is up about $15,000, Williams says. Day cabs are up about $8,000 to $10,000. Used vocational trucks, however, have declined in value due to state budget shortfalls, declines in commercial building and a lack of public works projects, Williams says.
Williams has seen huge differences in pricing from dealer to dealer. In surveying pricing on a particular 2000 model tractor, he found prices ranging from $39,800 to $60,900 for the exact same specs. And sales volume has been jumpy as well. “For three weeks many dealers will be as busy as they have ever been – in fact some noted they had the best month ever. Then it would be dead for three weeks.”
Like Williams, major used truck remarketers have seen sharp demand for low-mileage, late-model highway tractors.
“Pricing has firmed throughout all used truck market segments throughout 2002,” although some have firmed more than others, says Bill Gordon, president of the Freightliner LLC business unit that operates the SelecTrucks used truck network. “Day cabs remain very strong, and low-mile, late-model have strengthened significantly.” Gordon says that the recovery in prices for higher-mile fleet trucks has been less pronounced.
Mileage is king
Kansas City, Mo.-based Arrow Truck Sales saw pricing firm up from early this year through mid-summer, says Jim Stevenson, vice president of asset management. “Since late summer, we have seen a stabilization in pricing,” he says. “But there’s still a premium on a low-mile, properly spec’ed truck.”
Actually, specs aren’t nearly as important these days as mileage. “It’s miles, its miles, its miles,” Stevenson says. Low mileage is clearly the No. 1 priority. Although that’s always a concern, mileage is of particular interest now because some truck owners that have traditionally bought new are beginning to dabble in the used truck market. Those customers are especially interested in low mileage. And inventory of those trucks is drying up.
The growing shortage isn’t just a demand issue, either. The supply is dwindling. “Everyone’s frustrated because there are just not that many trucks available,” says Eddie Walker, owner of Best Used Trucks in Fort Worth, Texas, and president of the Used Truck Association. “In the future, there may only be high-mileage trucks.” Walker points to greater utilization of equipment and, especially, the popularity of team driving among carriers. “It’s not uncommon to find 2000 or 2001 model trucks with 500,000 to 600,000 miles or more on them in today’s market.” Carriers are putting as many miles on trucks in two years as they used to put on them in four, Walker says.
Bigger buyers
Used truck remarketers have traditionally depended on the owner-operator market for the bulk of sales, but the customer base is starting to balance out a bit. Freightliner SelecTrucks locations have seen the ratio of fleets to owner-operators increase, Gordon says. The company, which already has some initiatives aimed at first-time truck buyers, is exploring some leasing programs and other incentives to further encourage fleet buying.
“We have seen a growth period selling smaller fleets and people buying multiple trucks over the past two quarters,” says Arrow Truck Sales’ Stevenson. “We’re probably at about 50/50 now; before we were definitely heavier on the owner-operator side.” Arrow is pleased with that trend, Stevenson says. Fleets generally prefer trucks in a multiple buy to be the same model and specs. That gives large used truck networks like Arrow an advantage over the independents in going after fleet business, Stevenson says.
Creative solutions
Faced with an ample supply of used trucks in the past couple of years, remarketers have formulated some creative strategies to find new markets.
