For owner-operators truck shopping, this is the best of times and the worst of times.
While the selection of used trucks is vast and prices are comparative bargains, it’s harder to buy. Many traditional financing sources have either closed their doors or tightened their standards. Freight is down, making it more difficult to predict or sustain income for making truck notes.
As the recession drags on, many owner-operators are holding on to their rigs longer to conserve capital. While they would like to replace aging vehicles with newer ones, they are taking the prudent course and maintaining what they have until the business environment rebounds. As they stay on the sidelines, the used truck market remains weak.
“It’s pretty bad for the used truck market,” says Eric Starks, president of consultant FTR Associates. “There’s a lot of equipment out there. There are plenty of people who are upside down on their equipment,” meaning they owe more on the truck than it is worth.
Starks says even if the used truck market springs back, it will take time to work through the inventory sitting in warehouses and on dealer lots. He expects the tough market to last into 2010.
Carl Heikel, president of Arrow Truck Sales, says business was bad during the downturn in 2001, but nothing like this. “This has been much worse than at any time in the 59 years of Arrow Truck Sales,” he says.
Terry Hebron, president of Heavy Trucks and Equipment Wholesalers, a used equipment website, says he’s been in trucking for 40 years and involved in used trucks since 1985, but describes the current market as the worst he’s seen. “A lot of dealers I talk with weekly are barely hanging on,” he says. “They’re cutting back on small expense items just to survive.”
Used truck sales have been limping along for at least a year as trucking slumped along with the economy. Rich Simons, president of Daimler Trucks North America remarketing, says the market became “volatile” in the second half of 2008.
Big Truck Sales of Moline, Mich., would sell 120 to 150 trucks at retail and a similar number to wholesale in a good year, which owner Gene Burnet says, “We haven’t seen a good one in a while. Even before the banking crisis hit, we were already down. I’m not buying much of anything unless I know I can sell it.”
Despite the glum assessment, Heikel says his company is in “recovery mode.” He says retail sales have been growing monthly since January, though the business is still down from two years ago. “There’s accumulated need for trucks out there,” he says. “We have a lot of customers who need to renew their fleets and trade in their old trucks.”
Although his business is down half from last year’s sales level of “several hundred” trucks, Tom Hendrix, used truck manager at Landmark International of Knoxville, Tenn., is optimistic. “Our phones are ringing a bit more,” he says. “I think it will start picking up by the end of summer pretty respectably.”
Heikel says the primary buyer for used trucks has consistently been owner-operators, but in recent months fleets have started acquiring used models instead of new. The reasons are tightened credit standards and the sharp price declines. “For a 3- or 4-year-old truck, you’ll pay a third of what you’d pay for a new truck,” he says.
Another change is occurring in the type of trucks owner-operators are buying. The tight economy and higher fuel prices have convinced operators to switch from their favored models of the past. Instead of sticking with the boxy models with long hoods and powerful horsepower engines, today’s cost-conscious buyers, including owner-operators, are choosing aerodynamic designs. “Now it’s about the bottom line,” Simons says. “It’s not about the flash and flamboyancy – it’s about managing your costs per mile.”