Getting Used to Used

Fuel economy. Maintenance. Purchase price. Resale value. Truck operators continue to voice concerns about diesel engines made after Oct. 1, when U.S. Environmental Protection Agency rules on emissions kicked in, and they’re doing it with their pocketbooks. Sales of new trucks were brisk in the spring and early summer as customers rushed to place orders before the deadline. Today, the sales climate for new iron is volatile, to say the least.

Not so in the used-truck market. Truckers who begged off buying rigs with so-called ’02 engines because of the higher costs associated with exhaust gas recirculation and other emission controls have kept the used-equipment market humming. In some parts of Canada, demand has outpaced supply, firming up truck values and ending any thought of a used-truck glut. Late-model, low-mileage, big-block, and multi-transmission specs are all the rage. Used day cabs are especially hot, but there was a point earlier this year when 70-inch condos were flying off lots in Calgary, of all places, says Aaron Toth, used-truck manager for Freightliner Canada, and manager for the company’s three SelecTrucks centres.

David Fulghum, vice-president of MacKay & Co., a market research firm, warns that the current run on used trucks may be short lived. “Once fleets get more comfortable (with the new engines),” he says, “they’ll get back to buying new. I think we’re going to see the supply of used trucks come up again as the class-8 market strengthens and the relationship reverses itself again.”

Used-truck dealers in Canada, at least, don’t seem immediately worried. Frank Oliveira, vice-president of Arrow Truck Sales Canada, the used-trucks remarketing arm for Volvo and Mack, expects his inventory to stay tight. “The value of a used truck is an individual-perceived value per regional market … ’02 is driving the value to a degree, but people are harping on it too much,” Oliveira says.

Even after skepticism over ’02 engines dissipates, concerns about the general economy, global issues, and rising fuel prices will keep fleets and owner-ops feeling conservative, Oliveira says. He adds that the limited number of new units sold over the last couple of years will still be enough to sustain demand for used trucks in 2003 and beyond.

Moreover, perceptions about used trucks have changed. Oliveira says his phone has been flooded with calls from fleet managers who now realize that used trucks will do the job just fine, especially for short-haul and dedicated lanes, at a far lower price than new class-8 trucks. Longer-life components and extended warranties are also helping to drive interest.

“There’s still going to be a strong demand two years from now. Supply is going to be low because new trucks today and since 2000 aren’t selling,” Oliveira says. Gone are the guaranteed residual values, easy financing for new equipment, and wave after wave of repossessions from bankrupt truck buyers, all of which contributed to an oversupply of used trucks in recent years.

“The industry was so good, just-in-time was at its peak, and production was so high, that we attracted a lot of flies,” laments Toth, who says Freightliner used-truck inventory in Canada has fallen to about 300 units compared to close to 2,000 at its peak a few years ago. “The ones who are still in (the business) are not doing it for fun anymore. The market sort of weeded those other guys out. In the short-term it hurt us, but we’re better for it now.”

Toth says for the used-truck market to prosper, new-truck sales are going to have to pick up. He’s hoping that the ’02 engines perform as advertised.

“Eighty per cent of my inventory right now is 1999 to 2001 models. If the ’02 engines perform worse than expected, where am I going to get inventory down the road?” he asks. “We need new truck sales to come back. We eventually need inventory in that 600 or 700 range. That’s a piece of cake, we can handle that.”