Buyers adapting to used market

Buyers adapting to used market

High demand coupled to still-shrinking inventories is forcing many used-truck buyers to alter their purchasing strategies. Yet experts believe the squeeze on used truck supply, which has seen buyers acquiring models with higher mileages than they would generally prefer, should start to shrink as the run up in new-truck purchases this year creates a steady flow of trade-in equipment into the market.

High demand coupled to still-shrinking inventories is forcing many used-truck buyers to alter their purchasing strategies. Yet experts believe the squeeze on used truck supply, which has seen buyers acquiring models with higher mileages than they would generally prefer, should start to shrink as the run up in new-truck purchases this year creates a steady flow of trade-in equipment into the market.

“The demand over the past 12 to 15 months coupled with the tight supply have led to a rebound in [used truck] values from the lows of 2009,” Richard Simons, president of Daimler Trucks Remarketing Corp., a division of Daimler Trucks North America LLC (DTNA), told Fleet Owner.

“Values are firming at these elevated levels as a result of the tight supply – even in the face of economic uncertainty,” he added. “The elevated values are good for the industry as they enable both fleets and owner-operators to trade existing trucks while purchasing equipment.”

ACT Research reported last month that, on a year-to-date basis, used-truck sales are running 6% behind the pace of 2010 largely because of a scarcity of highly prized low-mileage equipment. But Steve Tam, ACT’s vp-commercial vehicle sector, believes that dynamic is starting to change.

“Used truck mileage continues to edge up, in response to fleets holding onto their equipment longer,” he explained. “The market is still awaiting some relief to the shortage of sellable inventory as well as upward price pressures. Improving new-truck sales will result in increased trade-ins, and should provide some relief to the market.”

Demand for new Class 8 units largely outran production capacity this year, noted truck maker Freightliner Corp., another DTNA subsidiary, which should keep new Class 8 sales strong in 2012, helping increase the flow of used trucks taken in as trades. But it won’t be enough to significantly ease the crimp in used-truck inventory for some years to come, stressed Daimler’s Simons.

“Production of new-truck sales bottomed in 2009 [and now] most Class 8 fleets utilize a 48- to 60-month trade cycle in order to optimize their net depreciation,” he explained. “As a result, the incoming supply of Class 8 used trucks will be decreasing annually until 2014 to 2015. Of course, this forecast assumes
that we do not fall prey to a double dip recession.”

While there is equal demand for low mileage sleepers and day cabs, Simons pointed out, those fleets shopping the used market are now purchasing trucks with more mileage on the odometer as long as the trucks are covered to a comprehensive warranty.

“Many fleet buyers purchased large quantities of lower mileage used equipment in 2010, drying up supply,” he said. “Today, fleets are adapting to higher mileage equipment – 500,000 to 600,000 mi. – due to availability. In turn, fleets are demanding comprehensive reconditioning and support of the higher mileage equipment.”

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