Fontana: Information and luck needed to navigate used-truck market

The used-truck retail sales market finished the year strong, according to ACT Research. December saw a 23% month-over-month increase from November. The increased sales could be the result of fleets changing their purchasing patterns to get ahead of what will likely be higher-priced vehicles that meet the new stricter emissions standards.

However, it is often difficult to predict exactly what the used-truck market will do since used-truck prices are influenced by a variety of factors, some of which are difficult to predict. While you can safely predict that after a year of high build rates, there will be a glut of trucks on the used-truck market several years later, you can’t predict things like the bankruptcy of a major fleet that floods the market with trucks and therefore lowers used truck prices. When it comes to used trucks, it is the old supply and demand equation we learned in economics. Having a lot of the same kind of used truck on the market drives down prices, while a shortage of the right kind of used truck causes prices to rise.

Today, fleets are trying to decide whether it makes sense to alter buying cycles so they can avoid what is predicted to be a huge increase in new vehicle prices. I am hearing that we are looking at price increases ranging from $15,000 to $30,000-plus more per truck. The decisions we all make will have implications on used-truck availability and pricing down the road. But we all have to make purchasing decisions based on what is best for our fleets' profitability and efficiency.

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Each fleet is going to have to decide for itself whether deviating from normal trade cycles makes sense. But those that do need to keep in mind the total cost of ownership, which includes the residual value of the truck. Unfortunately, it can be difficult to predict what used truck values will be. For example, when the industry first started making the move from manual transmissions to automated ones, a truck with an AMT was not really valued in the used-truck market, and a fleet might have taken a hit in pricing for an AMT-equipped truck. Today, trucks with manual transmissions are less desirable than those with AMTs.

We’ve seen this pattern with other components and add-on devices. The problem is that it can be difficult to predict what second users of trucks are going to want four, five, or six years from now.

The situation gets even more complicated when you look at some of the emerging technologies that are coming into the market, including battery electric trucks, hydrogen fuel cell trucks, hydrogen internal combustion engines, hybrids, and trucks operating on renewable compressed natural gas.

I wish I had some insight into what used-truck values are going to be when we are trying to sell our used units. A crystal ball would be nice! The best advice I can give is to spec trucks for your duty cycles and spec with drivers in mind, because even if driver amenities don’t yield big returns on the used-truck market, they can help you attract and retain drivers. Driver retention is one of the soft costs you should factor into your TCO calculation.

All of us who buy trucks must keep a close eye on what’s hot and what’s not in the used-truck market today. At the same time, we need to follow what new technologies are on the horizon and not forget to look at factors like interest rates and economic indicators.

I wish it were easier to navigate the used-truck market, but I suspect it has always been complicated. The best we can do is make asset replacement decisions based on as much information as possible and then hope for a little bit of luck.