Dealers See ‘Cliff’ Deal as Fix for Slumping Used Truck Sales

This story appears in the Jan. 7 print edition of Transport Topics.

Used-truck sales slumped in late 2012, but last week’s “fiscal cliff” agreement created hope that a catch-up effect could buoy sales, industry officials said.

November sales of used trucks fell 16% from the month before, said Steve Tam, vice president of ACT Research, Columbus, Ind. That continued a trend he described as “very volatile,” including a 6% rise in October and a 17% decline in September.

ACT also reported that used-truck sales in November were 3% below the same month in 2011. ACT estimates its data measures about 10% of all used-truck sales.

“It was extremely slow in all of December,” said Rick Clark, president of the Used Truck Association, citing the fiscal cliff tax situation resolved last week (see story, p. 1). “That has a lot to do with vacations, Christmas and politics, of course.”

Clark, who also is vice president at National Truck Protection, Cranford, N.J., used a weather analogy to describe last month’s market conditions as “blustery.”

However, he held out some hope that resolving the tax issues portion of the federal fiscal cliff would help sales early this year.

Others were more optimistic.

“We are excited about 2013,” said Jim Rys, president of the House of Trucks, Willowbrook, Ill., which specializes in late-model,low-mileage tractors.

“We had a little procrastination,” said Rys, who anticipates stronger 2013 sales because of increased certainty about federal tax policy.

“The fourth quarter wasn’t as strong as we expected,” he told Transport Topics. “Because of the situation in Congress, there were a lot of accountants and business owners who didn’t know what kind of tax benefit they would have.”

“I am pretty optimistic about 2013,” said Chris Visser, who writes a monthly report on used trucks for the National Automobile Dealers Association, where he is senior analyst and product manager.

“We have now answered half of the fiscal cliff question. That will provide a bit more certainty to the market,” he said.

That should correct what he called “a little disconnect between economic performance and purchasing behavior” as the U.S. economy continued to grow late in 2012 and used-truck sales stalled.

“There will probably be some firming in used-truck pricing and volume,” he said.

On the other hand, Tam said he expects 2013 will bring slowing used sales and modestly weaker pricing.

That will happen, Tam said, because the gradual slowing in used markets created “a sort of equilibrium” between supply and demand to alleviate the shortage of available used trucks, and spiking prices during 2011 and part of 2012.

He gauged used-truck sales at about 250,000 in 2012, or about 20% more than new Class 8 sales last year, and predicted 2013 used sales will be between 235,000 and 240,000.

As the market cools, Tam said, “we will continue to see some erosion in price,” particularly in the retail market.

Retail equipment that sold for as much as $52,000 or $53,000 for much of last year ended the year below $47,000.

Tam said he expected there would be two consistent factors in the market — used trucks sold will be older and mileage will be higher — as fleets continue to wring every mile out of trucks bought just before 2007 emissions regulations took effect.

One sector of the used-truck market is being closely watched.

Visser said November was “a key month” for Navistar trucks with exhaust gas recirculation aftertreatment as trade-ins of 2010 models surged because some carriers updated their fleets.

Pricing for that equipment is being closely watched because of Navistar’s decision during 2012 to begin using selective catalytic reduction aftertreatment in the wake of a failure to obtain certification for the EGR engine.

“There was a lot of trepidation” about the EGR equipment’s value, he said.

“A lot of dealers got big packages and had to put a price on them so the equipment wasn’t sitting on their lots,” Visser said.

Some trade-ins were priced noticeably lower than competing models with similar mileage and features, he said. However, he added that Navistar trade-ins were similarly priced to competing models at other dealers.

Because the pricing range wasn’t consistent, he said he was hesitant to draw conclusions now about pricing of used Navistars.

Asked for comment about pricing of EGR-equipped used trucks, Navistar spokesman Steve Schrier said “we’re not seeing any differences in used-truck values related to emissions technology.”

While UTA’s Clark said he thought congressional action last week would spur sales to a degree, he still expects that the market won’t really pick up again until March.

Rys, who told TT that 2012 was a “pretty good year overall,” noted another issue to overcome: financing.

He said that he’s moving to arrange third-party financing whenever needed to stimulate business because of some banks’ continued reluctance to make used-truck loans.