LOTS ON THE LOT: There are bargains to be had if you're looking for a new or used truck. The tricky part is recovering the
MISSISSAUGA, Ont. –In this topsy-turvy world of ours, it’s difficult to make heads or tails about the impact the surging loonie is having on equipment pricing.
On one hand, the rise of the Canuck-buck has been favourable, driving down the price of new trucks and mitigating the increased costs of new-emission engines. But on the flip side, come trade-in time, owner/operators may have lost all the equity they were counting on having built-up in their existing ride.
“A lot of people that bought trucks a few years ago, bought them at an exchange rate when our dollar was at 65 cents and they bring them in today and if the truck was worth $140,000- $145,000 five years ago, it’s worth $110,000-$115,000 today,” explained John Nelligan, dealer principal with Harper Ontario Truck Centres, a Sterling and Western Star dealer in Mississauga. “They owe more than it’s worth. They’re kind of in a crunch right now and they can’t get out of the truck for what they have in it.”
That creates a double-edged sword for owner/operators and small fleets. For one, they may not be able to take advantage of the bargains that are out there on the market today. And at the same time, they may see no alternative to extending the life-cycle of their current truck, which will inevitably result in higher maintenance costs.
“It’s a good time to buy,” said Barry Dzikowski, a salesman with Kenworth Truck Centres. He noted for every penny the Canadian loonie increases, the cost of a new truck drops about $1,000. “But the thing that overshadows this is that the highway market is dead, regardless of the better pricing. Guys that financed in 04-05 are trying to get a whole lot more money than the market will pay right now. So they’re electing to hold onto them and put more miles on them when they should be trading in and getting into a new warranty.”
Dennis Sheehan of Sheehan Truck Centre warned some self-serving dealers are taking the opportunity to prey on these owner/operators and allowing them to roll the outstanding amount owing on their current truck into the financing of a new one.
“Some dealers are doing creative financing and burying these guys in their trade-ins,” Sheehan said. “If they owe $50,000 on a trade that’s worth $40,000 and they roll that extra $10,000 into the new one, these guys are getting upside down.”
He advised owner/operators not to get sucked into that trap and to hold off purchasing until a down payment has been saved.
“You have to pay for it eventually, why not put it down up-front?” he suggested.
Canadian Class 8 truck sales are forecast to remain weak this year, with some projections at about 20,000 units. Many trucks ordered by dealers to meet demand during the 2006 pre-buy are still sitting on dealer lots. That’s exacerbated by the fact the US economy is slowing and freight volumes are softening, especially in north-south lanes.
Meanwhile, imports of used Class 8 trucks from the US more than doubled last year as bargain hunters looked south to find better deals, according to Kenny Vieth, a partner with A. C. T. Research.
However, dealers Truck News spoke with downplayed any effect an increase in used truck imports may be having.
“We’re not seeing a lot of used US trucks come here because usu- ally they’re not spec’d right for Canada. They’re not heavy enough for the weights that we haul,” pointed out Nelligan.
And Sheehan added “A lot of US trucks don’t have block heaters and most don’t have the insulation packages we have up here. When we order new trucks, they’re built to Canadian standards, coolant good to -40 C, block heaters, insulation packages and daytime running lights. The US guys don’t think of that. They’d freeze in the winter.”
Canadian owner/operators and fleets also tend to spec’ higher horsepower engines and 13-speed transmissions compared to the 10-speeds favoured south of the border. Another trend in the truck market today is that the value proposition for purchasing new rather than used trucks is evolving.
The 2006 pre-buy was aimed largely at delaying the higher purchase prices of 2007 engines, which in the US increased costs by up to $10,000 per truck. Here at home, however, new trucks with 07 engines have actually decreased by about that same amount, thanks to the strength of the dollar.
“Today you’re paying about the same for a new tractor as you did three to four years ago, and that’s incorporating all the model year changes and price increases over the years,” said Denis Legault, general manager of Cambrian Truck Centre in Sudbury.
Now that 07 engines have been on the road for some time with no widespread reports of reliability or fuel consumption issues, dealers we spoke with say customers are more inclined to buy new trucks with the latest generation of engines under the hood.
“If you’re talking just a few dollars more for a new-emission truck, it’s a choice to make,” said Nelligan.
For dealers, much like for fleets and owner/operators, times are tough. However, the vocational market has remained strong and
investment you’ve made in your current rig, dealers explain.
there is a light at the end of the tunnel. Owner/operators can’t hang onto their current trucks forever.
“There’s going to be a balancing point eventually as they cost more to maintain,” Dzikowski said. “Right now we don’t see it, but repair costs will factor in there and that will get it back on-side.”
Nelligan expects the market to rebound later this year and hopes some balance is restored to the market.
“It’s going to be a slower year until we get into August and September. By the time we go into September, I think the combination of a US election and the US hopefully getting out of its doldrums a little bit will get us moving,” predicted Nelligan. “I think there will be a pretty quick up-cycle to 2009. I’m not sure how much of a pre-buy there will be this time. A lot of fleets bought trucks last time and a lot of dealers bought a lot of trucks, and a lot of those trucks are still around.”
For those owner/operators who are frustrated because they’re stuck in a truck that was due for a trade-in, the dealers we spoke with didn’t have any simple solutions to offer. Perhaps the best words of advice are to take good care of your equipment and keep a close eye on market conditions. Most of all, don’t bury yourself with a financing arrangement you can’t afford.