The North American new-truck market has stayed red-hot for a lot longer than many observers would have anticipated 12 or 18 months ago (27,223 class-8 sales in Canada for 1997; 29,094 in 1998; and 28,170 in 1999 just through November). And all that interest in new iron has also meant a flood of ever-newer trade-ins. It’s not uncommon to see trucks coming back at the two- to three-year mark. The combination of more recent-model trucks-and a lot of them-makes the idea of buying such low-mileage used vehicles instead of new more and more feasible. “At the moment, I’m negotiating with three of Canada’s larger fleets, each of which is considering a multi-unit purchase from SelecTrucks,” says Frank Oliveira, Canadian sales manager of the SelecTrucks used-vehicle sales division of Freightliner Trucks. “These are fleets that, three or four years ago, would have never considered anything but new trucks. They’re looking at the capitalization, and seeing the dollars-and-cents advantage.”

Fleets and owner-operators are trading in their trucks earlier in large part because the fundamental nature of the freight business is changing. “Today, manufacturers and others are warehousing on the road, thanks to just-in-time component delivery, and their realization that a rolling warehouse is cheaper than a fixed, structural one,” says Steve “Bear” Nadolson, president of the U.S.-based Used Truck Association, and corporate used-truck manager at Sweeney Truck Group in Lima, Ohio. “Annual mileage has jumped, and we’re seeing more and more trucks being traded at the two-year mark, which used to be unthinkable.”

It’s a trend that sits well with Ernie Poulin. President of Welland, Ont.-based LaSalle Transport, Poulin has bought nothing but used tractors for almost 15 years. LaSalle is a flatdeck operation with 15 company-owned tractors and 30 contracted owner-operators running dressed Canadian lumber down into the central and mid-Atlantic U.S., and bringing back steel products and a variety of other cargoes. The LaSalle-owned fleet ranges from 1987 to 1995 models, and that’s just the way Ernie Poulin likes it. In his ledger book, buying new tractors-although he does own a fair number of new, 48-foot steel-aluminum combo flatdeck trailers-just isn’t worth it.

“I like to buy tractors that are getting to the end of their warranty.four to five years old,” Poulin declares. “You have to check them out carefully, and I only buy from area small fleets where I know the owner and trust them. But if you do it right, you can get a vehicle that’s got many more years of service in it, and you can get it for a great price.”

Most of LaSalle’s fleet are five-to-seven-year-old Freightliners with 350-horsepower Caterpillar 3176 engines and eight- to 10-speed transmissions. There are a few Kenworths of a similar vintage, most also with the same Cat engine. “Cat really flooded the market with the 3176, so they’re a good value,” Poulin says. “They’re on the small side, but give good fuel efficiency, and Cat offers a two-year extended warranty. In fact, at one point they had a special promotion: $250 for a warranty that covered just about anything.

“How can you go wrong? You buy a truck at a fraction of its original price, and then get the engine guaranteed for two years?”

The average truck at LaSalle’s fleet runs about 85,000 miles a year, and the company keeps the engines programmed at 350 horsepower, although the company sets limits on speed, cruise control, and progressive shifting. The operating cost for a typical truck on the international runs is $1.42 a mile.

“We operate basically in a 500-mile radius down into the States,” says Poulin. “What’s the difference if you’re driving to Columbus, Ohio, with a 350-horse engine or a 500-horse one? Twenty minutes of time? And your fuel economy is much better.”

With the electronic engines from 1993 or newer, Poulin claims “you can achieve much better mileage than in the old days, twice as good, I’d say.”

When LaSalle’s trucks get decidedly long in the tooth-10 to 12 years old-Poulin will shift them to local runs in his immediate vicinity on Ontario’s Niagara Peninsula. But there are exceptions.

“This 1987 Freightliner I just bought six months ago,” he points out with pride, standing in LaSalle’s yard, “and it runs to Michigan every day towing a six-axle trailer of lumber. I paid less than $10,000 for that truck, and she’s going to be the ‘classic’ member of my fleet. I’ll be running her another five or six years, guaranteed. Only problem with this one is that it’s a mechanical engine, so I can’t re-rate it from the original 425-horsepower rating. But it just passed its provincial Drive Clean emissions test with flying colors.”

Poulin says the secret to making money in trucking is to hold onto your equipment once it’s paid for.then it’s all gravy. “Say I buy a five-year-old truck for $25,000, and now it’s three years later. What would I get for an eight-year-old tractor: $12,000 maybe? But if I can run it another five years, I’ll still get $12,000 for it! You can get to a point where a truck has depreciated as much as it’s going to. And when the day comes that the maintenance costs are just not worth it, I can still get $3000 to $4000 from the scrapyard.”

Poulin finances his “new/old” acquisitions over 36 months, through his local bank, and arranges weekly payments, which saves some money. He’s never missed a payment in 15 years of business, so his rating at that institution is rock-solid.

“Of course, you have increased maintenance requirements with older equipment,” he acknowledges, “and you can’t skimp on that. We have two mechanics and an apprentice here, and I have instituted a firm policy: every single one of our trucks, including those run by our 30 owner-operators, must be put through a complete mechanical safety inspection every three months. It’s the same criteria we have to do once a year for the Ministry of Transportation re-registration, but we do it every 90 days. And I pay for that inspection at any of several local certified garages for our owner-ops, but they of course pay for any repairs required.”

There’s an added cost to checking things so regularly, but Poulin says it’s worth it for peace of mind.

“We’re strict about that policy: if an owner-operator hasn’t attended to that quarterly inspection, he doesn’t get dispatched by us,” Poulin notes.

And does running older equipment cause problems for Poulin in attracting and keeping staff drivers?

It doesn’t seem so. “I treat my people well, with decent rates, a seniority bonus, a safe-driving bonus, and other recognition programs,” he sums up.

“A typical driver might get an annual bonus cheque for $2200 or so each spring through these programs. In the 10 years I’ve been hiring staff drivers, I’ve only had two leave. The way we operate here may not be for everybody..but it’s working just fine for us.”

Given the flood of used equipment on the market these days, it’s a buyer’s market for the Ernie Poulins of the industry. But for new-truck buyers and dealers, the market brings sticker-shock on trade-in values. Says Ivan Melvin, owner of Sterling Trucks dealer Evangeline Motors in Coldbrook, N.S.: “If you asked me what a given used truck is worth, I’d have to ask you, ‘At what point in time?’ We’ve quoted on trades, ordered the guy a new truck, and by the time it came in, the value of his trade-in had dropped $10,000.”

In 1999, Evangeline sold 100 new Sterlings, but took in just 25 trade-ins. “We sell a lot of purely vocational specs like dump trucks, mixers, and crane trucks,” Melvin notes, “and you don’t tend to get trade-ins as often with those kinds of transactions.” Six are still on the lot at present. “Most of those were class-8 tractors, with a sprinkling of class-6 and -7 vocational straight trucks,” he adds. “We retailed most of them, but a couple got wholesaled to a cutter. The scrap/parts value for something like a mid-1980s tractor is running $5000 or $6000, depending on the powertrain.”

Those old, tired sleeper trucks just don’t have much of a market these days, he says.

“I’d be a lot happier to see a daycab offered than a sleeper, especially if it’s a heavy spec.something the guy could go into the woods and haul lumber with or whatever,” Melvin explains. “And dump trucks are always good.”

Don Woodworth, used-truck sales manager at Brentwood International Trucks in Moncton, N.B., says that while his dealership is wide-open for trade-ins (with 20 trucks on the lot at the moment), some of his sources for wholesaling trucks seem to be pretty full and are reportedly shipping equipment down to the States.

Asked if he’s noticed any upsurge of American buyers coming north to take advantage of the weak Canadian dollar-currently, $1 US translates into about $1.47 Canadian-Woodworth grins. “We get some, but they want to steal them, as far as price goes. I had one American in this week, a guy from the Midwest who swings by about four times a year. We’ve done some business with him and others, but I hear the U.S. market is jammed with used trucks now, as well.”

The trick is to stay on top of the market and know your price, he emphasizes. “A truck that was worth $40,000 two months ago might only be worth $30,000 or $32,000 in today’s market. We track our inventory very carefully, and ensure we know what the market will bear,” Woodworth says. The typical age at trade-in he’s seeing is three years, and this can put the independent operator in a bit of a fix.

“In order to survive in this industry, a unit has to run 200,000 to 250,000 kilometres a year,” he explains. “So, when a truck’s getting to be three years old, it’s probably got at least 650,000 km on it, and the owner’s at best 100,000 km away from being out of warranty on the driveline. Sad part is, maybe they financed it over five years, and they’ve only paid off three of those.so now they’re ‘upside down’ regarding the trade. In a weak market for used, that can hurt.”

Last year, Brentwood retailed about 85% of its used equipment and wholesaled the rest. Late-model heavy specs and daycabs are an easy sell, but older highway tractors with upwards of 1.5 million km are an understandable glut on the market.

Bear Nadolson believes that this is also going to cool-off the new-truck market, in part because of what Don Woodworth earlier noted: the “mid-point equity” anticipated when many operators bought their new truck and financed it over five years just isn’t there.

“It’s going to get interesting,” he says. “I wouldn’t be surprised if there are as many trucks traded-in in year 2000 in the States as there are new ones purchased-maybe more. I’ve been telling my salespeople that one of these days some operators may well start thinking about trading-in their 1994 or 1995 equipment for ‘creampuff’ low-mileage 1998s instead of buying new. They’ll look around and think, ‘Heck, I can get a really good truck at just half or two-thirds the cost of new!’

“And then the used-truck market will stabilize-at least regarding the popular models and conditions-and could become very profitable.”

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Protecting the Investment

If you’re buying new and want to beef up the warranty, you can buy an optional extended warranty, which typically increases engine/drivetrain coverage to five years or 500,000 miles. But what about used trucks? Truck OEMs, enginemakers, and independent vendors offer varying aftermarket warranties that generally cover one or two years. Depending on what equipment you’re assessing, check out the following programs from your local dealer:

s Caterpillar Inc.: Advantage s Cummins Engine Co.: Encore s Detroit Diesel Corp.: P3 s Freightliner Trucks SelecTrucks: Limited, FAVOR, or Select Extra s International: System One s Kenworth Truck Co.: Elite Used Trucks Gold/Silver/Bronze s Mack Trucks: All-Star Protection Plans s Peterbilt Motors Co.: Red Oval s Sterling Trucks: Silver Shield and SilverShield Plus s Volvo Trucks: Medallion and Medallion Plus

Another source worth mentioning is New Jersey-based National Truck Protection (201/804-1632), which offers aftermarket warranties in both Canada and the U.S.

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Specs That Sell … And Resell

What specs matter most to a used-truck buyer? Starting with a three-year-old daycab tractor with a 330-hp engine and 9- or 10-speed transmission valued at $35,000:

s A 425-horse motor would add $5200 in value. s Adding a regular 60-inch sleeper brings $5000 more value. s An air-ride suspension can earn $4000 more at trade-in. s An engine brake is worth $1400 in resale assessment.

Source: Truck Blue Book valuation guide, by Gary Dillow. Courtesy of publisher National Market Report. All figures reported in U.S. dollars.