Trucking is in a downturn and the U.S. economy may well be headed into a recession, but so far it appears that thanks to strong fundamentals supporting it, the used-truck market will weather the storm pretty handsomely in 2008.
“The used-truck market sustained itself extremely well throughout 2007,” W.M. “Rusty” Rush, president & CEO of Rush Enterprises, which operates the largest network of heavy- and medium-duty truck dealerships in North America, tells Fleet Owner.
“There is always seasonal softness to consider, but what has helped maintain the market overall has been the increase in the cost of new trucks over the past four years,” he continues. “And the downturn in truck freight that began in late 2006, coupled with the initial uncertainty about EPA '07 engines, helped make a highly spec'd premium used truck more attractive to more buyers.
In addition, Rush points out that the steady increase in the exportation of lower-priced (non-premium) used trucks outside the U.S. — many wind up in Eastern Europe where demand for trucks is high — has maintained equilibrium. “If not exported, those trucks would have been a drag on the used market” over the past few years.
Rush calls what has happened to trucking a perfect storm. “There was a big pre-buy in '06 [ahead of the '07 emissions regs] when GDP was strong,” he remarks. “But in the fall of '06, just as many fleets were stocking up by pre-buying, the freight market started going down. Many of those orders were locked in, and as the fleets absorbed those trucks last year, the freight went down. [The result is] many new trucks have been parked along the fence” by many fleets.
“This has dampened the new truck market,” says Rush, “but we have been able to maintain [solid] pricing on used trucks.” Given that, it is not surprising then that Rush reports the supply of used trucks may be “problematic” going forward into 2008. “We are aggressively keeping supply levels up.”
Turning to the credit crunch that is all over the news these days, Rush says there should be no concern on the part of buyers with good credit profiles.
As for Rush's own financing offerings, he says the firm “works through some prime lenders and there's no doubt that delinquencies have increased. We're hearing the highest rates are along the coastlines versus the rest of the country.
“That kind of information puts pressure on credit practices,” he continues. “The standards do get tighter, but a qualified buyer can be approved. Those with marginal credit, on the other hand, may have to make a larger down payment and expect different terms.”
Terry Williams, editor of The Truck Blue Book, views 2008 as starting off as a “sluggish, slow” year. “Right now, it is a buyer's market for used trucks, but some think it will convert to a seller's market in the second half,” he tells Fleet Owner.
Williams concurs with Rush that getting financed will be different this year. “Having good credit will be important,” he points out. “The smaller finance companies have left the market and others have pulled back,” making the finance opportunities options available to buyers — especially those credit-challenged — much slimmer.