Truck Auctions Drawing More Buyer Interest as Used Vehicle Prices Rise, Supply Declines

This story appears in the Jan. 10 print edition of Transport Topics.

Auctions are getting another look from truck buyers as good used equipment becomes scarce and prices are rising, according to dealers and industry watchers.

Online bidders are becoming more numerous as buyers continue to turn to the Internet to expand the geographic reach of their procurement efforts, auctioneers said.

“Inventories on desirable pieces are low,” said Karen Braddy, general manager of both Manheim Heavy Truck and Equipment Auctions and Manheim Specialty Auctions. “It’s hard to find that late-model, low-mileage road tractor. Buyers are driving the prices up.”

Braddy told Transport Topics that a 2005 International brand tractor with 250,000 miles on it — very low mileage, by auction standards — fetched $27,000 at auction in late December.

Back in August, the same type of truck with about as many miles on it was $7,000 cheaper, Braddy said.

The abrupt increase in the price bidders were willing to pay for such a truck typifies the change in buyer behavior auctioneers observed last year.

In 2010, “The volume of units we sold in the truck market was about consistent with what we sold last year, yet the value of the product sold was up,” said Peter Blake, chief executive officer of Ritchie Bros. Auctioneers, Vancouver, British Columbia. “To see the number of units the same and the value of the product being up, clearly the demand is greater.”

According to the used-truck experts contacted for this story, most auction shoppers are end users, with retail dealerships making up the next largest category of bidders. Wholesale “brokers,” who are intermediaries between auction houses and dealers, are present at some auctions, and there is a modicum of interest from big fleets. However, fleets and brokers barely tip the needle when it comes to bidder demographics, auction-house executives told TT.

In any case, it appears that dealerships are the most interested in increasing their presence at auctions.

Dealerships, which would prefer trade-ins to auctions, are “looking at any tractor they feel like they can buy ‘right,’ ” allowing for a profitable resell, Manheim’s Braddy said.

This, according to some in the used-truck business, is because the supply of trade-ins has dried up as fleets hold onto equipment longer — the result of the recession sapping the industry’s willingness to lay out capital for replacement trucks.

“There are not a lot of trade-ins we can see,” said Bryan Boyd, owner of Boyd Truck Center, a used-truck business based in Tulsa, Okla. “Everybody is having a hard time finding equipment.”

“Supply is rapidly diminishing,” said Jon Tepper, president of used-truck dealer Ameritruck in Charlotte, N.C. “Auction values are off the chart, and I don’t see anything that’s going to change that.”

The fly-on-the-wall perspective is much the same.

“Equipment’s been so scarce that you go anywhere you could get it,” said Steve Tam, vice president of the commercial vehicle sector for ACT Research Co., Columbus, Ind. ACT tracks U.S. equipment trends and Tam is the firm’s point man for used-truck data.

ACT’s U.S.-only auction data show that in the first nine months of 2010, about 4,200 trucks were sold at auction. That’s up from approximately 3,450 trucks sold in the first nine months of 2009, Tam said.

“They’ve seen a pickup,” he said of U.S. auctions, which, according to ACT, account for about 25% of all used-truck sales in the nation.

Meanwhile, with more buyers in the hunt for equipment at the auction block, online transactions have become more commonplace, and auctioneers are anticipating more of the same this year.

Ritchie Bros., which established its online presence in 2002, set a company record for online sales last year. The Canadian company, which gets more than half of its auction revenue from U.S. auctions, said it sold $860 million worth of equipment online in 2010 — a 4% increase over 2009, which at the time was the best year for online sales in the company’s history.

Ritchie Bros. doesn’t disclose the percentage of sales attributable to Class 8 trucks and on-highway trailers.

Privately held Manheim doesn’t disclose sales figures, but Braddy said that about 23% of the trucks auctioned off by the company in 2010 were sold online. She categorized that as a “strong” online sales presence and noted that in the past few years, online sales have hovered somewhere around 20%.

The supporting pillar of online sales at Manheim, in the current used-truck market, is a dealer’s ability to use the auction house’s nationwide inventory as a “virtual lot,” Braddy said.

“You never know who’s going to walk into your dealership and need” a truck you don’t have, Braddy said. “And if you don’t have it, you can go online, find what your customer is looking for, buy it and have it delivered.”

When Ritchie Bros. and Manheim began their e-commerce initiatives, many buyers didn’t have computers, and some who did lacked the hardware to make online transactions a sound business proposition.

As Blake at Ritchie Bros. said, “We had to wait for technology to catch up.”

Now, the technology needed to facilitate increasingly popular online truck shopping has indeed caught up — to the point where one auctioneer with only a fraction of either Ritchie Bros. or Manheim’s market power calls it “pretty simple.”

“We were founded in 2006,

and we started doing online bidding about four years ago,” said Mark Geary, president of TruckCenter.com. He said that in 2010, about 35% of all of the company’s sales were transacted online.

TruckCenter.com, which also conducts traditional land-based auctions, estimates that it moved about 7,000 units, including trucks and trailers, in 2010.

From a user perspective, TruckCenter.com’s online sales system is similar to the online bidding tools used by much larger auction houses. Buyers can view and bid on available trucks in a Web browser, and sellers wishing to market their vehicles online are held to strict standards. No truck can be listed before the seller provides a minimum of 15 digital pictures and a detailed inspection report that are posted along with the online listing, Geary said.

The goal, he said, is to get an online buyer as close to “kick[ing] the tires” as possible.

Blake at Ritchie Bros. seconded the notion.

“For us, the experience of recreating what a bidder or a seller experiences at our auction is fundamental.” Blake said.

However, there are still plenty of buyers who won’t be satisfied with virtual tire-kicking, he added. Some online buyers, dealerships mostly, will have an employee “go and inspect the truck in person, then report back to the boss who bids online,” Blake said.