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July 16, 2012 3:30 AM, EDT

Rising Prices for Older Vehicles Spur New Financing Approaches

By Rip Watson, Senior Reporter

This story appears in the July 16 print edition of Transport Topics.

Rising prices for older-model used trucks have forced sellers to come up with new approaches to make tractors more affordable, according to industry executives.

John Cosgrove, managing partner for CAG Truck Capital, Chadds Ford, Pa., said the market for well-maintained, older used trucks is especially tight right now. That is limiting the choices for owner-operators, who often use these vehicles.

“There is limited trickle-down of well-maintained trucks,” said Cosgrove, whose company provides dealer financing.

Rick Clark, president of the Used Truck Association, said the price of older used trucks that used to sell in the $28,000-to-$35,000 range now can cost as much as $55,000.

The prices of older used trucks are following the same upward path as late-model used equipment and new tractors.

“It’s getting more and more difficult” for owner-operators, said Clark, who is a vice president at National Truck Protection, an industry supplier. “It’s harder to get buyers financed, because lenders want bigger down payments.”

Owner-operators typically buy tractors with 750,000 to 900,000 miles on them, as their existing units with more than 1 million miles on them reach the end of the road.

However, “some of the used trucks on the market right now have not been very well-maintained because of the economy the past few years,” said Norita Taylor, a spokeswoman for the Owner-Operator Independent Drivers Association.

“So now you’ve got higher monthly payments, along with higher maintenance costs,” Taylor said. “Plus, lenders are tighten-ing up their lending require-

ments, and a lot of them will not look at the older trucks with the high mileage. All in all, this is forcing owner-operators to look at newer trucks with even higher price tags.”

One company, Commercial Fleet Financing Inc., Carrollton, Texas, introduced on June 26 a new program meant to counter rising financial pressures.

It is offering used Schneider National Inc. trucks with no money down at the time of sale and $99 payments for the first two months.

“There are more owner-operators coming back into the market,” said Jason Giese, program manager for Commercial Fleet Financing. “They are trying to get into their own trucks.”

The move is designed to provide well-maintained trucks to buyers who can build up cash in the first days of ownership to put them on a firm financial footing, Giese said.

“We wanted to assist our valued clients in any way we could,”

he said. “Schneider put their trust in us, so we built them a custom program.”

Schneider, Green Bay, Wis., is selling tractors this summer after committing to buy 3,000 new units this year.

The new program already has put more than 500 trucks on sale, Giese said.

The typical tractor has 650,000 miles, with the ability to deliver 6.5 miles per gallon because of Schneider’s rigorous maintenance, he said, and his company is prepared to develop a similar program for other fleets to market their used equipment.

American Truck Group LLC, Gulfport, Miss., announced an-other financial initiative on July 6, a program meant to encourage truck ownership. The program is offered in collaboration with Jacobson Cos. Inc., Des Moines, Iowa, a third-party logistics and warehousing firm.

Jacobson has agreed to provide an initial down payment for qualified drivers, with American Truck arranging the rest of the rent-to-own program, according to American Truck Group’s statement.

Meanwhile, CAG’s Cosgrove said rising prices are creating all kinds of uncertainty.

Some dealers are becoming reluctant to buy those older trucks because of uncertainty relating to the recent price increases.

“They don’t want to get stuck holding overpriced trucks,” Cosgrove said.

At the same time, he explained, there also is a reluctance of some owner-operators, who “are being careful not to get a truck that may need a lot of work.”

That is a particular issue for later-model priced used trucks, those in the $65,000-to-$75,000 price range, Cosgrove said, because of concerns about maintenance costs on new emissions control equipment.

Still another hurdle is tighter lending practices by bankers that have curtailed their past practice of allowing owner-operators to start driving a truck with no money down, Cosgrove said.

John Ferry, a spokesman for Daimler Trucks North America, told Transport Topics that some owner-operators are turning to larger fleets that offer lease-to-purchase programs and new equipment.

“We have not seen the owner-operator really buying new for the last several years,” he told TT.