As new-truck orders continue to rebound nicely in 2011, the downward pressure extended trade cycles have placed on used trucks continues to be felt throughout the market. Used-truck buyers are continuing to find higher mileage, older vehicles on the market even as sales begin to pick up.
According to ACT Research, Class 3-8 used truck sales bounced back from a dismal May performance, rising 9% in June. Even with that increase, though, 2011 sales remain 6% below 2010’s pace.
ACT’s “State of the Industry: U.S. Classes 3-8 Used Trucks” report also highlights the fact that buyers of used trucks are now finding vehicles with ever-increasingly higher miles.
“Used-truck mileage continues to edge up in response to fleets holding onto their equipment longer,” said Steve Tam, vice president-commercial vehicle sector with ACT Research. “The market is still awaiting some relief to the shortage of sellable inventory as well as upward price pressures. Improving new-truck sales will result in increased trade-ins, and should provide some relief to the market.”
That relief, at least when it comes to buyer’s checkbooks, is not coming very quickly.
“We are seeing tight supply of inventory, especially in tractor classes,” John Diez, senior vice president of asset management-Fleet Management Solutions (FMS), for Ryder, told Fleet Owner. “Generally, we are seeing units with more miles demanding higher prices than we saw a year ago.”
In its second quarter report, Ryder reported pre-tax earnings of $67.5 million in its Fleet Management Solutions division, up 46% over the second quarter of 2010. It attributed much of the gain to improved performance in commercial rentals as well as improved used-vehicle sales results due primarily to higher pricing and lower average quarterly inventory.
Ryder chairman & CEO Greg Swienton acknowledged the improved environment for used trucks sales in his remarks, saying that “although the economic environment remains challenging and inconsistent, we have been very successful in taking advantage of market opportunities to deliver second quarter and first-half earnings that exceeded our plan. In Fleet Management Solutions, our commercial rental and used vehicle sales continued to perform extremely well and we saw improvement in full-service lease retention and new sales.”
Swienton even noted that Ryder’s lease fleet, like many of the fleets today, is older and therefore offset some of the sales gains in the bottom line.
Over at Arrow Truck Sales, president Steve Clough told Fleet Owner the used market entered 2010 with large inventories and low prices. That has turned around in 2011, resulting in fewer vehicles and higher prices.
“Everyone keeps talking about how high the average mileage of Class 8 trucks is,” Clough said, “[but] the issue really is the average age of the trucks that we are seeing, which will naturally be at higher mileage, and that has been driven partly by fleets having held on to trucks longer than normal during the last downturn. This trend of having an older mix of trucks will likely continue until fleets get back into a normal trading cycle.
“As far as prices, demand continues to be good and supply limited and that situation will always drive firm or higher pricing,” Clough added. “The supply part of the equation will remain tight for the next few years. So as long as the demand does not drop, prices will continue to be firm or rising.”
Rush Enterprises, in its second quarter report, said gross revenues rose 100.7% over the second quarter in 2010. Used-truck sales alone rose from 889 units delivered in the second quarter of 2010 to 1,156 units in 2011.
The company also said its parts, service, and body shop sales revenue jumped to $170.4 million vs. $118.5 in 2010 due to the increasing age of the U.S. fleet.
“Record highs in parts, service and body shop revenues that were achieved in March continued throughout the second quarter,” said W.M. “Rusty” Rush, chairman & CEO. “Our Rush Truck Centers set a new company milestone for performance in June, eclipsing $1 million per day in gross profit from our parts, service and body shop operations. This led to another record quarterly absorption rate of 112.9%. This increased activity is attributable to the age of commercial vehicles in operation, combined with unprecedented activity in the energy sector, particularly in the central U.S. We expect parts, service and body shop revenues will continue at current levels through the third quarter.”