Older is not always better

by Lou Smyrlis

When it came to equipment renewal in recent years, many fleet owners adopted the thinking that older is better. A confluence of factors – the over-capacity caused by the deep recession followed by a slow and uncertain recovery; the higher pricing of the new engine technology combined with uptime issues – led fleet owners to defer truck purchases and made for the oldest fleet in recent memory.

Our own Equipment Buying Trends Survey this past summer found that 53.4% of fleet respondents were on trade-in cycles for their heavy-duty trucks of greater than seven years. More than a quarter were hanging on to their vehicles for more than a decade.

During the recession and for a few years after it, extending the trade-in cycle of fleet vehicles was sound strategy. For particularly financially strapped fleets it was an important element to survival.

But that approach only makes sense up to a certain point.

Research from the American Trucking Associations shows that around the 550,000 mile mark heavy duty truck maintenance costs per mile triple from five cents per mile to 15 cents per mile. That makes hanging on to tired iron a questionable strategy.

Not investing in new iron is particularly questionable in light of the better fuel economy offered by the latest engine technology and the improving economic outlook. Our research of Canadian shippers conducted at the tail end of 2014 found that 42% expected to increase their use of LTL freight service in 2015 while a third expect to increase their use of TL freight service.

Just as important, 31% of Canadian shippers expect TL trucking to have the greatest pricing power of all modes while 19% expect LTL to have the greatest pricing power. No other mode comes close.

In other words the market research shows that as long as new truck purchases are well thought out, the freight volumes and increase in rates necessary to help finance the cost of new truck purchases will be there.

It appears fleet owners across Canada are reaching the same conclusions on their own.

Our Equipment Buying Trends Survey found only 13% of responding fleet owners and managers had no plans to replace at least part of their fleet in 2015. Particularly heartening are the equipment renewal plans of Canada’s small carriers.

Since the recession these fleets have lagged far behind their large and medium-sized counterparts when it came to investing in new truck purchases.

This year, however, only 22% of small fleet owners and managers told us they had no plans to purchase new trucks – by far the greatest commitment to new equipment renewal we’ve seen from this sector of the industry since before the Great Recession

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