These remain heady times for those selling used trucks – and demand for used iron seems poised to stay high, despite the volatile behavior of both the freight market and the U.S. economy as a whole.
Indeed, consulting firm ACT Research recently noted that all of its month-over month comparisons – including volume, price, miles, and age – for all weight groups of used trucks improved back in July, as demand showed no signs of slacking.
Indeed, Steve Tam – VP-commercial vehicle sector for ACT – pointed out to me a couple of months back many carriers are engaging in what he terms a “stop gap” vehicle replacement strategy in order to put off paying higher sticker prices for 2010 emission-compliant equipment just a little longer.
“If you’ve got trucks with 650,000 miles on them and are replacing them with models with 500,000 miles on them, you’re giving yourself a little more time before you have to buy brand new equipment,” Tam explained to me. “But at some point, however, the incremental maintenance cost will become too much to make such a strategy work.”
That’s oh-so-true, of course, as any veteran trucker will tell you. But it’s a maxim that also depends heavily on the initial condition of the used trucks acquired in the first place.
Jake Civitts (at left), director of used equipment for Paccar Financial (PFC), for one, advises fleets and independent operators alike to do their homework and know as much as possible about a used truck’s history before taking ownership.
“With the Federal Motor Carrier and Safety Administration’s [FMCSA] new Compliance, Safety, and Accountability [CSA] program requiring truck operators to be much more vigilant about the safety of the equipment they operate, the days of buying used trucks nearly sight unseen are over,” he cautions.
That being said – and despite the almost certain longer-term potential for higher maintenance costs – used trucks remain a good deal in several ways, said Civitts.
First, buying used trucks can often allow independent operators and fleets the opportunity to go after business that may not provide standard operating margins, he noted.
Second, financing used trucks usually provides an owner with a much lower monthly payment than an owner financing new trucks according to Civitts – if, of course, the fleet or single owner in question is pursuing the financing option.
Based on his experience in the used truck market, Civitts offers some for single truck operators and fleets alike when considering the purchase of used highway iron:
Tip No. 1: Know what you're buying yourself into. With state and federal roadside inspectors looking closely at equipment, particularly for mechanical conditions that would likely cause an accident or break down, Civitts said truck fleets and single operators have to be much more vigilant about inspecting equipment and checking maintenance records. “If you're not fully comfortable with the idea of buying a truck from someone without inspecting it first, then don't,” he stressed. Civitts also recommends conducting a full inspection before buying, paying particular attention to the truck's brake systems, coupling devices, exhaust systems, frames, fuel systems, lamps, electrical systems and batteries, steering mechanisms and kingpins, suspension, tires, wheels, rims and hubs. “Use the same pre- and post-trip inspection sheets you or your drivers use and look for conditions that could affect your safety score if you were operating the truck that same day,” he added. “If possible, ask to see recent inspection reports or maintenance records associated with the truck.”
Tip No. 2: Look for value. Based on data points gleaned from PAF’s used truck centers, Civitts said four key specs help drive a used truck's value, making it more attractive and productive and lowering its operating cost:
Tip No. 3: Clear the air. Pay attention to the type of engine and emission control system in the truck. If the truck is equipped with a diesel particulate filter (DPF), check its current condition and whether it's been cleaned at regular intervals. Even if you won't be operating your used truck in California, consider choosing used trucks that meet California Air Resources Board (CARB) requirements over ones that don't. Trucks with aerodynamic fairings will save you money on fuel costs over ones that don't. Plus, your trucks become eligible for EPA SmartWay certification, which may be required by your customers.
Tip No. 4: Let the years go by. Until recently, the model year was the main factor in establishing a used truck’s value and that made sense as truck components were fairly similar from year to year, Civitts said. Thus, the older the truck, the greater its maintenance needs, so a newer used truck was almost always worth more than an older one, he explained. Not anymore. “That’s changed in the last few years as mileage has become the most important indicator of a used truck’s value,” Civitts pointed out. “Thanks to new emissions equipment, different model year trucks are not quite comparable. Today, the first question you should ask about a used truck is, ‘What’s the mileage?’” The most desirable, highest-value used trucks will have 300,000 to 400,000 miles on them. Lower-value, but still desirable trucks, will show 400,000 to 500,000 miles on the odometer.
Tip No. 5: Knowledge is power. Many truck and fleet owners choose a lender based solely on the interest rate when financing a used truck purchase. While the rate should be competitive, consider whether the lender is willing to work with you on such things as payment schedules, particularly if your company's business is cyclical. Also consider whether the lender is knowledgeable about trucks and the trucking industry. A lender that understands trucks can be in a better position to determine a truck's true value and assist your operation if additional financing is needed.
Good stuff for any used truck buyer to keep in mind if and when they next head out to troll the Internet or dealer lot in search of over-the-road equipment.