Though sales of used trucks slowed at the end of 2011, inventory is expected to continue tightening in 2012 and beyond – with mileage on used truck odometers predicted to keep climbing as well.
In an interview with Fleet Owner, Steve Clough, president, Arrow Truck Sales, said the slowdown in available used Class 8 inventory began last year as the used-truck pipeline started drawing on the “Great Recession” years when production and shipments of new Class 8 dropped precipitously.
Clough said that the availability of three- to four-year-old trucks with 300,000 to 400,000 mi. on the odometer dropped 35% in 2011 compared to 2010 – and he expects availability to decline 20% this year and another 11% in 2013.
That decline in used-truck inventory is expected despite slippage in sales that occurred as 2011 drew to a close, according to data tracked by ACT Research Co. In November last year, Steve Tam, ACT’s vp-commercial vehicle sector, said used-truck volumes were “mixed on a channel by channel basis,” with auction dealers able to obtain and sell more equipment, offsetting some of the softness in the retail and wholesale markets.
“The industry was hopeful that improved new truck sales would provide some much-needed relief for the growing used-truck inventory shortage, but so far that has not happened,” he added, perhaps because most used-truck units are older with more miles, meaning it takes longer for them to be repaired and reconditioned before they are sellable units.
Zach Bourn, director of used equipment for Paccar Financial, noted in written responses to questions from Fleet Owner that most fleets are still only talking about replacement units versus growth units as they prepare their 2012 vehicle acquisition efforts.
“When you combine that with a truck market forecasted to be higher in 2012 than 2011, there will just be more trades,” he explained. “However, very few units – by historical standards – were purchased new in 2008 and 2009, thus making for continued tight supply of late-model, low-mileage trucks.”
Bourn points out that low-mileage, high-content, aerodynamic products will continue to remain in demand on the used lot through 2012.
John Diez, senior vp-asset management for Ryder System, told Fleet Owner that this year “will be another strong year” for used-truck sales and he doesn’t expect pricing to fall off much at all.
“There will be strong demand for OTR [over the road] tractors and there will be continued challenges for customers looking for late-model, low-mileage units,” he noted. “Day cabs will continue to sell very well versus sleepers.”
On the medium-duty side, Diez notes that there is more stability in terms of inventory and pricing as 2012 unfolds, but stressed “pricing will be up year-over-year for these units.”
Jack Mitchell, vp-remarketing for Penske Truck Leasing, added that the market for vocational models has nowhere to go but up. “With construction improving, vocational models should be selling better,” he explained. “The market for sleepers, however, has changed. There were so many a few years ago, but now inventory is shrinking – thus the mileages will go up.”
He said, from Penske’s perspective, the top end of acceptable OTR used-truck mileage is now moving from 500,000 to up around 650,000.
But the mileage question cuts two ways in the opinion of Arrow’s Clough.
“For one, we can’t really see widespread extension of the initial ownership cycle beyond four years, because once you get into the higher mileage bracket, you’re seeing a higher level of maintenance,” he pointed out. “That’s when cost of repair becomes a significant issue, because now you’re tying up technicians and dealing with longer vehicle downtime.”