INDIANAPOLIS. The supply of the low-mileage used trucks favored by retail buyers is evaporating fast. As a result, prices are starting to climb significantly for the first time in years – a trend that should continue for a while, according to Steve Clough, the new president of Arrow Truck Sales. “There’s a used truck shortage coming and we think supply is going to be tight for three or four years,” he explained during a presentation here at the FTR Associates 2010 Transportation Conference.

Clough said the reason supplies of these trucks will be short is pretty simple. The production of new trucks dropped to record low levels during the economic recession, while fleets that typically bought new trucks went into the used market to buy large groups of low-mileage, late model trucks – usually in large lots of 100 power units or more. That bulk buying rapidly worked off the large inventory of used equipment that had built up during the recession, he said.

Combining that atypical spike in demand with low new truck production rates from 2007 to 2009 – volumes that feed the used truck market three and four years out – means used truck supplies will be short for a significant amount of time, Clough noted.

He pointed out that new truck production slipped from 133,000 units in 2008 to 95,000 units in 2009 and is expected to finish out 2010 only around 110,000 units. And that is not enough to restock the used truck market significantly.

As a result, used truck prices are starting to rise, climbing 11% in August this year from the fourth quarter of 2009, said Clough. Yet he noted they are actually higher, because the typical markdown that occurs from May through July of 10% to 12% to account for aging inventory didn’t occur this year. Translation: Prices are actually up about 25% overall.

Yet price isn’t the biggest factor in the used truck market, Clough stressed. “Supply and demand is really the big issue,” he said. “Right now, there’s almost no supply of 200,000- to 300,000-mile trucks to be had in large numbers. There’s not even a real oversupply of 400,000-mile trucks – and those are what fleet retail buyers are looking for.”

On top of that, a lot of what fleets are trading in now are 700,000- to 800,000-mile vehicles, since they put off purchasing vehicles through the economic downturn. Trucks with that mileage are not attractive to the retail used truck buyers, said Clough. Usually the only buyers for such high-milers are port or drayage short-haul operators.

“Basically, this means the ‘used truck option’ for fleets trying to put off buying new equipment may not be there much longer – if it’s still there at all,” he added.