TORONTO — Not wanting to sit on their hands as freight conditions improve — but still apprehensive about making major capital investments — truck buyers, including big fleets, are increasingly turning to used trucks to grow their business.

In fact, there are few more honest barometers right now than the pre-owned truck market to gauge fleet owners’ sentiments about the medium-term freight economy.

Demand for used commercial vehicles has soared this summer — as much as 60 percent over last year. And only a couple of years removed from a major glut of pre-owned inventory, suppliers are now predicting a shortage in the next 24 months.

Last year, the price for a class 8 highway truck in 2009 was comparable (in absolute dollars) to the sticker price of 30 years ago, but the value of iron has shot up exponentially in just a few short months. According to the American Truck Dealers Association, the average retail value of a 2007 Freightliner Century 120 with 360K was up to $43,300 in July from $36,000 in the fourth quarter of 2009.

"There’s been a very large price increase over the last three months especially," says Nevio Turchet, used trucks manager for SelecTrucks Canada, adding that he had his best ever single-month in sales this past June. "I’m buying trucks for a minimum of $3500 more, for the same truck, same year, than I did back in March."

How did we go from a glut to a shortage
that quickly? Look at 2008-09 sales

Turchet agrees that truckers, big and small, are in a position to add some capacity as volumes and rates improve, but are hesitant to spend on much more expensive, somewhat unproven 2010 trucks while the economy is still fragile.

"Everybody is a little afraid this may not be sustained growth, so why get into a four-year commitment with a 150,000 truck when you can get into a two-year commitment with a good quality 50,000 truck?"

Frank Oliveira also says speculation of a double-dip recession in the U.S. has carriers hedging. "When you have this type of uncertainty people have this little instinctive pain in their gut," says the VP of sales for Arrow Truck Sales Canada. "You have to take a look at expanding business with the least amount of risk, and right now that’s used trucks."

Not so long ago owner-operators represented about 90 percent of Arrow Trucks’ business, adds Oliveira. Today, it’s down to 65 percent, with company fleets making up the difference.

Although there are still plenty of 400,000-mile, ’06-07 pre-buy models around, many quality low-mileage trucks that entered the pre-owned market after being parked against the fence for much of the recession are now rapidly being driven off of dealer lots.

And the lack of a similar pre-buy in ’08-’09 indicates that there’ll be a significant shortage of inventory in the next two years.

"How do we go from a glut to a shortage that quickly?" Oliveira asks rhetorically. "How many (new) trucks were sold in the last two years? So, just by systematic logic, how many trucks are we going to have in the (used) market in four or five years? Nada."

There’s been some talk that a severe used truck shortage could be staved off as financiers demand equipment back from "zombie truckers" that they’ve been so lenient with because of the depressed value of equipment.

It’s possible credits could finally start closing the books on some inefficient carriers, but Turchet, for one, shrugs off the notion.

"If the finance companies have lived with these guys this long, then there’s no reason not to live with them further, especially when you’re seeing a rise in freight," he says. "No one wants a repo because regardless of value, the finance company usually doesn’t win on that one."

As well, many trucks that are taken from bankrupt carriers aren’t exactly in the best condition and unless there’s a cash infusion to get them road-fit, they won’t be too marketable outside of the auction block.

Brian Sarnia, sales manager with Freightliner Manitoba concurs.

"Low-mileage, late model used trucks are the ones people are after." With older, somewhat neglected equipment, "there’s the extra cost of certifying them and bringing them up-to-date, so it’s not always worth it."