With most truckers just trying to stay afloat in an economy deeply in the tank, it's little wonder that the used-truck market is kicking off 2009 not with champagne but with seltzer.
“Used-truck values would indicate the buyer is in a much better position than 12 months ago,” points out Terry Williams, editor of Penton Media's Truck Blue Book (TBB). “Dealers are afraid to stock inventory beyond 30 days and continue to move aged equipment, which creates deals and can affect values. But the dealer has to work more aggressively than ever to be priced for the current market. Inventory is building for medium- and heavy-duty trucks. This positions a buyer to get a deal, as not only dealers but OEMs need to move equipment too. Fleet bankruptcies are also adding to the available inventory.
“The question now,” he continues, “is who and where are the buyers? Trucking is one of the first segments hit by an economic slowdown, so those carriers and owner-operators on the edge have probably been pushed off it and are doing something else.”
Even those seeking to buy may end up stymied by the ongoing credit crunch that's squeezing every type of business. “The marginal credit buyer is finding it very difficult, if not impossible, to secure financing,” says Williams. “They need to work more to tell their story to the dealer, who in turn can work with a finance company to perhaps get them money in spite of a couple of hiccups. And since dealers are assuming more of a stake in some finance deals, they're positioned to want the best credit customers too.
“There is money out there, but a dealer has to be willing to work harder, be more involved in the process to bring that deal together,” he continues.
“The used market is slowing down, both on the retail and wholesale side,” advises Carl Heikel, CEO of Arrow Truck Sales. “Our business is split roughly 50/50 between wholesale, selling used trucks to smaller dealers, and retail, selling trucks through our 16 national locations primarily to owner-operators. On the wholesale side, dealers are not investing in used truck inventory. On the retail side, owner-operators — our main customers — aren't buying. If the freight is there and if the market is good, they will make a buying decision pretty quickly. But now, from both groups, business is down. Both are finding difficulty from the credit crunch as well.”
On the positive side, Heikel emphasizes that it is a buyer's market. “Now is a great time to buy because demand is off. There are real bargains to be had; these are price levels we've not seen in some time,” he explains. “But that will change as there is a low supply of three- to four-year-old used trucks coming into the market. Many trucks in this age range are coming off lease, but new truck sales were so low in 2007 and 2008 that overall supply of used trucks is down.
“Right now, the average age of trucks within the fleets is increasing,” he continues. “So, at some point, fleets will have to replace equipment, regardless of a rebound in the economy or not, just because the vehicle population is getting so old it won't be an economic or reliable option to keep running them. They will have to replace them and when demand comes back, there will be too little inventory in the market.”
As for what fleets may decide to do with their trade cycles this year, TBB's Williams contends that “more fleets will delay the purchase of vehicles to maintain a balance in lieu of parking them.” On the other hand, he says “there were [new truck] contracts in place before this economic mess and unless they are restructured, the trucks will roll off the line.”
Heikel points out also how tough times are reconfiguring the used-truck landscape itself. “Many smaller dealers are going out of business. That's a double-edged sword for us, for many were good customers of ours on the wholesale side. However, that also creates higher market share opportunity for us. On the financing side, many of our competitors are leaving the market, again good for us as we have our own in-house financing arm. We actually see opportunities moving forward so we are planning to expand our retail locations. We'll need the capacity when the market comes back.”