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Loonie’s downward spiral causing sticker shock

The loonie’s wings have been clipped and that means the cost of buying new equipment has gotten a lot higher


Canadian fleets and owner/operators looking to purchase new equipment may be in for a serious case of sticker shock.

New trucks, built and priced by US-based manufacturers, are becoming more expensive in Canada as the loonie dives in value to, at press time, about 76 cents compared to the US greenback. That’s the worst it’s been in more than a decade and analysts are expecting it to decline further.

Just over a year ago, when the loonie was worth 89.09 cents US – at that time its lowest point in four years – Mackie Moving Systems manager of fleet services Derek Varley told Truck News in an interview that every cent the loonie drops adds about $6,750 to the cost of a $135,000 truck. His crystal ball was working well then, and he had just placed an order for new equipment to get ahead of a potentially cheaper loonie.

“There’s a lot of money to be saved with good planning,” Varley told us last spring. “It behooves fleet managers or owners, whoever is doing purchasing, to understand what may take place with the dollar and what is happening with the dollar and to work those projections to your advantage. I’m looking three months ahead. There are some strong projections that by mid-summer it could be back to an 85-cent dollar and that’s not going to be a fun time to be replacing equipment.”

Most fleets that are in the market for new equipment would welcome that 85-cent dollar about now. New trucks in some Canadian markets will now cost you more than a single-family home or condominium.

One owner/operator we heard from went shopping for new iron in Calgary and was told the exchange rate on a new truck was 31%. A Volvo VNL780 was priced at $175,000, resulting in monthly payments of about $4,500.

Ontario-based owner/operator Shawn Marcil told us he priced out a comparable replacement for his current tri-axle Western Star, which cost him $186,000 in 2013. That same truck today costs $230,000.

“And you still have all kinds of dumbasses cutting rates,” said an incredulous Marcil. “We have guys in Sault Ste. Marie that are working for as low as $53/hour. They should all have to buy new trucks and see how long they last.”

Even dump trucks with fewer options have prices in the window ranging from $200,000 to $213,000 in northern Ontario, Marcil says.

And guess what? The next round of EPA/NHTSA fuel economy standards for heavy-duty trucks, slated to go into effect in 2018, will add another US$10,000-$12,000 to the cost of a new Class 8 truck.

“The EPA madness has to stop,” Marcil says. “Remember a few years ago when a highway tractor was dirt cheap compared to a dump truck? I’ve even seen tractors with sleepers on the lot for $186,000-$200,000 – and they don’t even have a body or hydraulics on them.”

For Greg Decker, owner of Alberta-based Triple Decker Transport, the decision to buy a truck in 2013 – before the precipitous decline of the loonie – may have kept him in the business.

“I am oh so glad we bought our truck in February 2013,” he told Truck News. “It was ordered in September 2012 and the exchange rate we had was 1.5%…The truck price alone was $142,000, plus extras. With the exchange rate now, the truck would be approximately, at a 22% exchange, $176,000 plus an extra $32,500 for upgrades. The total bill today would be approximately $208,500 – an extra $36,500 difference.”

Decker worries further cost increases – driven by the EPA and exacerbated by a weak Canadian dollar – could drive owner/operators to extinction.

“I see a $250,000 truck being the normal price in a few years’ time,” he said. “I see a drastic reduction in the O/O ranks coming really soon. There is no way a young person can save up enough money for a down payment on a truck anymore. So once the old-timers retire, the numbers will fall.”

We asked Mike Sharpe, dealer principal of Hamilton, Ont.-based Eastgate Truck Centre, if there was any way customers could mitigate the effect of currency swings, in the absence of any crystal balls.

“As a dealer, we don’t have any control over exchange rates,” he noted. “We are tied to the OEM process. As regulation and technology costs increased over the last 10 years, the strengthening (Canadian) dollar helped mask the rise, and in turn benefited Canadian truck purchasers. When the dollar goes the other way, the impact is more visible. However, it can benefit cross-border receivables in some cases. Canadian-specific operators, unfortunately do not see that benefit. We try the best to plan based on the current information we have – it’s all we can do.”


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