Uncharted territory

No one seems to be sitting on the fence when it comes to the value of a used truck or tractor with a '02-emissions compliant engine. Some are adamant that these engines represent a significant devaluation, while others insist the impact on value is minor, if any. At this point, the '02-compliant engines primarily affect the value of model-year 2003 used trucks and tractors. Had these engines been

No one seems to be sitting on the fence when it comes to the value of a used truck or tractor with a '02-emissions compliant engine. Some are adamant that these engines represent a significant devaluation, while others insist the impact on value is minor, if any.

At this point, the '02-compliant engines primarily affect the value of model-year 2003 used trucks and tractors. Had these engines been mandated as part of the truck OEM's model-year changeover, in lieu of a calendar date, assessing the value of used vehicles would be a normal process, i.e., based on model year, mileage, specifications, market conditions and quantity of like equipment in the marketplace.

But with an emissions-compliance date of October 1, 2002, two different '03 model-year trucks exist: those with the known engines and those with '02 engines, which were encumbered with unfamiliar technologies, worries of fuel mileage deterioration, additional weight and higher maintenance costs.

On the surface, it seems easy to conclude that a '03 model-year truck with a build date prior to September 30, 2002, will bring a higher resale than those built with the '02-compliant engines. But I would caution that determining a valuation adjustment is more complicated than looking at a production date or a new engine. Here are some other things that should be taken into consideration:

  • Product offerings from the engine manufacturers add potential confusion to the valuation process. Unable to meet the 2002 deadline, Caterpillar introduced a bridge engine, while Mercedes-Benz increased its position in the U.S. market because it did not have to meet '02 regulations.

    One could argue that the Mercedes engine, which is available only in Freightliner, Sterling and Western Star trucks, would give those vehicles a higher resale value. But several factors work against this: lack of sales history in the U.S., concern over nationwide parts availability, and its off-shore status.

  • Caterpillar's bridge engine might be in a position to assume a higher resale value since it is a somewhat familiar product. In addition, there is the possibility that it provides superior fuel economy to engines using EGR. But since this engine was a short-term solution, was the quantity produced sufficient to affect value? And has the theoretical fuel economy advantage actually been significant enough to warrant greater value?

  • Although it's generally accepted that '02-compliant engines are more costly to operate, can we really estimate what this amount is? And is there a one-to-one correlation between this amount and a decrease in re-sale value?

  • Assuming a three-year trade cycle, we won't see used 2003 inventory in any reasonable quantity until late 2005. When combined with an overall shortage of used equipment, we have rather small pool from which to draw conclusions. In fact, the current shortage has led to steady, if not increasing, used-equipment values. This trend has the potential to prop up the value of 2003 equipment no matter what engine has been installed.

  • We could see a greater than normal influx of equipment in 2006 as fleets pre-buy to avoid vehicles with'07-compliant engines, leading to depressed used-truck values.



The oversupply of used equipment would correct itself if fleets run a four-year trade cycle, replacing equipment in '09 to avoid vehicles equipped with another unknown — '10-compliant engines.

What is an '02-compliant truck worth? Well, we're waiting to see what the market says.

The great pre-buy that took place before the '02 emissions deadline was the stimulus for the resurgence in used-truck values. This deadline also led to a reduction in the supply of used equipment, particularly late model trucks, and now, ironically, may bolster prices for equipment with '02 engines as they become the best, if not the only, available late model used equipment.

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