As Arrow Truck Sales celebrates 60 years selling used trucks, the company’s new chief executive says inventories of used trucks for sale will go from a glut not that long ago to a shortage in the near future.
The inventory of used trucks in May was down 33 percent from May 2009, and “we’re getting fairly close to a normalized inventory,” said Steve Clough, who became president and CEO of the Kansas City, Mo.-based used truck remarketer, which is owned by the Volvo Group. Clough, who began his career with White Motor Co., had served as chief financial officer of Arrow Truck Sales since the company was acquired by Volvo.
Other trends are pointing to improvements in the used truck market, said Clough in a June 24 session with trucking journalists in Kansas City. Arrow’s retail sales are up 60 percent year over year, and credit applications are up 27 percent during the same period. Arrow finances approximately 45 percent of the trucks it sells.
Used truck values are firming as well, but they had nowhere to go but up. Clough pointed to NADA data showing that even in absolute dollars – meaning not adjusted for inflation – the price of a mid-range Class 8 sleeper in 2009 was comparable to the price in 2002 and was the lowest in many years.
Looking at the fundamental supply and demand dynamics, used truck inventories are destined to decline sharply, Clough said. Last year, many 2005-2006 pre-buy trucks came into the secondary market and there also was excess equipment due to failures and repossessions. “Supply mushroomed in 2009, while demand was weak.” But low-mileage used trucks are rapidly disappearing, although there remain “a fair amount” of 400,000-mile trucks.
With low new truck sales in 2007-2009, the supply of used trucks is about to drop, Clough said. “There will be a shortage of used trucks.” Even if some analysts are right that lenders will demand trucks back from so-called “zombie truckers” – carriers that are in arrears on note payments – as used truck values strengthen, the result probably will just be a welcome increase to soften the inevitable shortage, Clough said.
Arrow Truck Sales was founded in April 1950 by business partners Jerry Nerman and the late Melvin Spitcaufsky; Nerman turned 90 in February and retired from the company just this year. Arrow operates 18 locations in the United States and one facility in Toronto. The company carries a variety of makes and models; Volvo and Mack typically represent less than half of Arrow’s inventory.