The Buyer’s Market

If you’re spreading blame around for the overcapacity of used trucks, be sure to cover all the culprits. Guaranteed residual programs and zealous finance companies are obvious targets, but what’s overlooked, says Stu MacKay of the market research firm MacKay & Co., is how changes in buying habits and manufacturing programs directly impact the types of equipment on the market. In the mid-1980s, MacKay notes, 25% of annual new class-8 truck sales went to less-than-truckload carriers, 20% to private fleets, 13% to construction companies, 12% to lease/rental operations, 10% to truckload fleets, and 20% to all others (government services, municipalities, utilities, etc.).

Furthermore, vehicle specs varied little among applications back then. Truckload, less-than-truckload, and lease/ rental companies bought tandem-axle day cabs or small sleepers. Private fleets and construction firms bought tandem-axle day cabs. Government and municipal fleets bought single- and tandem-axle day cabs.

Today, MacKay says, the composition of new class-8 truck buyers has shifted: 24% to lease/rental; 14% to TL; 13% to high-service (high-miles per year) TL; 13% to construction; 10% to LTL; 10% to private fleets; and 16% to all others. No longer is there a versatile and flexible universe of trucks being built. Truckload carriers buy long wheelbase tandem-axle big sleepers; LTL carriers buy medium-wheelbase, single-axle day cabs; private fleets buy medium and long wheelbase tandem-axle day cabs; and lease/rental companies buy all configurations.

Another major market influence is the concentration of buying power. About half of 1% of class-8 buyers now purchase around 50% of all new trucks each year, says MacKay. Some 65% of all new trailers are acquired by 1% of trailer buyers. “If a couple of the large leasing companies and fleets decide not to buy new equipment for a year or two, it really impacts the volume for the industry overall,” he says. Already, the market has more used trucks than it can handle. MacKay estimates about 300,000 used class-8 trucks will enter the used-truck market this year, about 90,000 trucks more than can be easily absorbed in this year’s marketplace.

Truck OEMs are taking countermeasures. Volvo Trucks North America acquired a 50% share of Arrow Truck Sales, which claims to be the largest independent seller of used trucks in the United States, with 17 locations. Freightliner created a separate used truck group, SelecTrucks, and in 1999 began producing its Legacy class of trucks: used cabovers converted into day-cab conventional tractors. Also unveiled was a program to factory-refurbish used trucks. Premium class-8 trucks get a variety of new components and appearance enhancements, plus customers are offered some choices for customizing the truck.

Another strategy is to convert integral sleeper tractors into day cabs, which are in high demand. Mack, for instance, has designed a removable sleeper for its CH model. Paccar has developed a kit that enables the conversion of its Peterbilt and Kenworth AeroCab sleepers into day cabs.

Several truck manufacturers have launched first-time buyer programs, combining special financing terms and warranty to enable first-time buyers to purchase a fleet trade-back truck that has been mechanically reconditioned to high standards.

Despite these efforts, the used-truck glut won’t change soon, MacKay warns, “because the major new-truck buyers of today will continue to be the new-truck buyers of the future, and they’ll be the source of the new-truck trades.”

Among the implications for those who buy and sell used trucks: fewer first-trade sources, more manufacturer used-truck control, more first-truck owner consolidation, and more consolidated competition.