August 23, 2010 4:00 AM, EDT

Used Truck Interest Grows

New Vehicles Are Only 23% of 2010 Registrations
By Rip Watson, Senior Reporter

This story appears in the Aug. 23 print edition of Transport Topics.

Registrations of used Class 8 trucks nearly doubled in the second quarter, far outpacing new truck activity as fleets snapped up both late-model used tractors and older vehicles, a new R.L. Polk & Co. report said.

Registrations of used heavy trucks reached a record 107,000 in the second quarter, bringing the total for the first half of 2010 to 176,474. By comparison, just 53,430 new registrations were recorded during those same six months (click here for related story). The total number of used and new truck registrations for the first half of 2010 equals 229,904.

So, only 23% of Class 8 truck registrations were new vehicles. By comparison, during 2008, 42% of Class 8 registrations were new vehicles, according to Polk, Southfield, Mich.

As the used truck market is reviving, the surge in registrations also is showing a strategic shift in fleets’ buying strategy.

“Many companies are looking at the uncertainty about new engines and the cost of new equipment and deciding to take advantage of some very new used trucks when they can find them,” said Donald Broughton, an analyst with Avondale Partners, St. Louis.

“Good used equipment . . . is viewed by smaller companies as a more economical way to either grow their fleet or improve their inventory,” said an Aug. 13 Polk report.

Experts agreed the used truck market is improving.

“It’s definitely been a lot busier,” said Tim Schaeffner, vice president of Bank of America Leasing in Chicago. “Our inventory is at the lowest level in two years. When we place a couple of ads we get dozens of calls. That wasn’t the case six or eight months ago.

“It’s mostly five- or six-year-old equipment that’s being bought up,” he said. “Smaller companies are buying whatever they can get.”

Newer equipment is in high demand, too, other experts said.

“The market is tightening for low-miles and late-model tractors,” said Paul Wachter, president of Taylor & Martin Enterprises, a used truck auction firm, in Fremont, Neb.

Schaeffner agreed, saying “there isn’t that much late-model equipment available.”

“It is almost impossible to find later-model, lower-mile trucks,” said Stuart Smith, corporate wholesale manager for SelecTrucks of Houston. “Even trucks in 400,000- to 500,000-mile range are moving well for us.”

“We are constantly out there searching for inventory,” said Smith, who estimated sales are up 30% this year. “We’re going to auctions, talking to fleets and networking.”

Both Smith and Wachter said auction attendance is growing as the used truck market improves.

Older equipment still is entering the market, although the pace is slowing, said Wachter, whose company obtains equipment from fleet dispersals, estates and retirements.

“Our normal sources of routine replacement equipment has grown smaller than it was,” he said. “If a company sold us 100 units typically, they are now selling 50.”

Schaeffner said he believes used truck sales will keep rising this year as the vehicles in the “pre-buy” before 2007 emissions rules took effect work their way into the market.

Ken Dominick, Smith’s colleague and center manager, agreed that the used pool is being depleted because some fleets are running trucks longer.

Werner Enterprises, Omaha, Neb., is one fleet that’s extending its trade cycle.

“We are extending the replacement cycle for company-owned tractors,” Werner said in a statement, noting a 14% rise in odometer miles over a 12-month period and saying average miles could rise more.

Nonetheless, some fleets plan to buy new trucks this year.

“The new trucks cost more, but we are seeing some things in fuel savings that are offsetting that,” said Tom Kretsinger Jr., president of American Central Transport Inc., Liberty, Mo. 

Kretsinger said maintenance savings and greater fuel efficiency convinced him to buy new tractors.

“If you don’t want to spend time and money in the shop, there comes a point where you do need to replace equipment” even if

the trade cycle is extended, Kretsinger said.

The tractor purchases will be offset by disposals into the used market, he added.

“ACT, as well as others I speak with, don’t have growth plans,” Kretsinger said. “They can’t always fill the trucks they have.”

“What we are encountering is a major sea change as fleets are looking at buying used trucks” for price reasons, said Richard Mikes, a partner at Transport Capital Partners, Sanibel Island, Fla., and a former industry financial executive.

Used trucks are attractive because of the 50% price rise in new trucks from 2006 to 2010.

Mikes said that the price rise in new trucks is putting pressure on fleets to raise hauling rates to pay for the equipment even if it is being run longer.

“Otherwise, you may not get back the value of buying that new equipment,” he said.

On the positive side, he said, interest costs are lower.

“If you can get the money, the interest rates are relatively low,” he added. “That ‘if’ is in capital letters and is underlined.”