Many industry veterans would consider offering guaranteed residual contracts on used trucks an act tantamount to suicide in today's market. Current wisdom holds that this was a big factor in creating the present glut of used trucks in the first place.
Team Vehicle Sales, Coral Springs, FL, disagrees. This company offers guaranteed residual contracts on its used trucks — and it wants to increase this part of the business. Are they crazy? If they were in the Class 8 market, they might be. But 70% of its stock is medium and light trucks — and that may make all the difference in the world.
“Medium- and light-duty commercial customers have always been an afterthought to the Class 8 business,” explained Jim Guice, president of Team Vehicle Sales. “The medium and light commercial truck business has always been less prone to the volatility that characterizes the Class 8 field. It's also a market that's been under-served in the past — especially in terms of used trucks. That's why we see an opportunity here.”
Guice has the experience to back up his assessment. A former executive with Ryder Transportation Services, Guice helped form Transportation Equipment Asset Management (Team) Vehicle Sales along with Louis Franklin, Daryl Cornell, Steve Brown and Tom Mata in 1999.
The company's mission is to offer people who use primarily medium and light commercial trucks a “total lifecycle approach to managing highway transportation assets, with the goal of reducing overall equipment costs and stabilizing capital expenditures.” In addition to equipment, the company offers vehicle spec'ing, fleet planning and purchasing, leasing, guaranteed residuals, asset management, and new vehicle financing services. That's pretty ambitious, given today's market conditions.
According to Lewis Nerman, formerly with Arrow Truck Sales, the current used-truck market has 60,000 to 70,000 surplus units in inventory. And Class 8 sales took a nosedive last year, falling 19.3%.
At the same time, however, Class 6 sales climbed 6%. Guice adds that the Class 3-7 market has also shown greater stability over the past decade, compared to the more volatile swings of Class 8. And, since most light- and medium-duty fleets don't fall under CDL requirements, there is greater ease in adding vehicles to a fleet to meet demand for services those trucks provide.
These are just some of the reasons Team Vehicle Sales is convinced there's more to the lighter end of the commercial truck business than meets the eye. As a result, they've decided to bring options such as guaranteed residuals and lease financing — once available only to Class 8 fleets — to medium- and light-duty commercial fleets.
“We used to think the typical medium and light commercial buyer picked up one or two trucks at a time,” said Guice. “Instead, we're finding that they buy two or three at a time. We're hoping to help them plan those purchases better, because there are lots of low-mileage, late-model-year medium-duty trucks out there now — trucks that have used only 35-40% of their economic life.”
“That's why we're putting together lifecycle planning options for these guys. We'll help them pick less expensive used trucks and help them maximize operational efficiency,” he added. “It's what the industry has been doing for Class 8 fleets for some time. Now we're bringing those options to the medium- and light-duty fleets.”
We'll see how that strategy plays out in the coming year.
