MIAMI – Martin Labbe, president of Martin Labbe Associates, says several factors have contributed to the glut of used truck on the market, involving everything from railroads to extended new truck warranties.
Labbe, speaking at the Truck Renting & Leasing Assn.’s 23rd annual meeting, said he believes it will take until 2004 for the industry to move the current surplus of used trucks through the market. However, he said that depends on whether production of new trucks remains low.
“The only way to really solve this problem is to take trucks out of the used truck population, either by scrapping them or selling them overseas,” Labbe said.
Labbe said the last time there was “reasonable equilibrium” between new and used truck prices was between 1995 and 1997. After that, railroads bowed out of the line-haul freight business, and truckload carriers picking up that business needed new equipment to serve it.
“But the economy could not handle the volume of used trucks they started turning over,” Labbe explained.
At the same time, Labbe said, extended warranties provided by OEMs took away much of the ownership risk, causing fleets to over-purchase equipment. Diesel prices also decreased, with a gallon of diesel costing less than one of bottled water by 1997, which Labbe said encouraged further over-buying.