Resale Market for Used Natural-Gas Trucks Offers Fleets Lower-Priced Alt-Fuel Options

This story appears in the Oct. 27 print edition of Transport Topics. 

Buyers wary of paying a premium for brand-new alternative-fuel vehicles are lifting the nascent market for previously owned natural gas-powered trucks, industry experts said.

“There’s a lot of customer interest out there for this type of technology,” said Sean Barnett, manager of MHC-Kenworth, a truck dealership in Dallas. “These trucks are a great entry into natural gas at a lower price point for our customers. We got 24 [model year] 2012 Peterbilt 384s spec’d for natural-gas technology in March, and we sold them all in 60 to 90 days.”

Regional variations in availability of compressed and liquefied natural gas may be stifling wider adoption, along with the vehicles’ suitability for specific applications, but the used marketplace gives buyers a less-expensive way to sample the technology, insiders said.

Barnett said all of the trucks at his dealership were similarly configured with CNG engines and automatic transmissions. Each truck received an engine overhaul before being sold for around $95,000. “That’s about $20,000 more than the price for a similar, diesel-powered truck,” Barnett said. The trucks sold new for about $140,000 each, he said.

Not far away, in Morris, Oklahoma, Russ Casey, owner of Morris Auto Sales, reports brisk sales of CNG-powered heavy-duty pickups.

“Used natural-gas vehicles are our whole business,” he said. “We sell 150 to 200 trucks and commercial vans a year, half to individuals and half to small fleets.”

Casey has found that natural-gas-powered vehicles hold their value well. “The systems are expensive up front, but we can sell a used Ford CNG F250 for $2,500 to $3,500 more than one that uses regular fuel,” he said.

Palmer Trucks, an Indianapolis-based Kenworth dealership, found overseas buyers for some of the 38 model-year 2012

Kenworth CNG-powered T440s it acquired in January. A dealership representative said local demand for the trucks, which were priced starting at $83,500, was hindered by the limited number of applications for which they were suited.

“They have a 9-liter engine, which restricts the gross weight rating of what you can haul with them,” said the representative, who declined to be identified.

Kenworth introduced its 12-liter CNG-powered T440, designed to haul 80,000 pounds, last year. The company that owned the 2012 trucks replaced them with new models running the larger CNG engines, the spokesman said.

And that expansion of choices has only recently begun, said Rich Kolodziej, former president of NGV America, a natural-gas advocacy group in Washington, D.C.

“Trucks with the bigger version of the Cummins Westport ISX12 G 11.9-liter engine did not begin entering the market until the fall of 2013,” Kolodziej said, pointing to a CNG engine manufactured through a joint project with diesel manufacturer Cummins and natural-gas specialists Westport.

Navistar Inc., maker of International trucks, began offering the engine at around that time, said Elissa Mauer, spokeswoman for the Lisle, Illinois-based manufacturer.

“We just began delivering the CNG International TranStar with Cummins Westport ISL G engine for the Class 6-7 market in September 2013,” she said.

Kolodziej said that some big-name fleets are entering the natural-gas market, referencing recent purchases of heavy-duty and medium-duty CNG-powered trucks by rental and leasing firms Ryder System, which ranks No. 11 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, and Penske Logistics, which ranks No. 32 on the TT for-hire list.

“That these companies are aggressively buying these trucks, leasing them and planning to eventually remarket them tells me there’s going to be a good resale market,” he said. “It’s just a matter of time until quantities of used, larger CNG-powered trucks become available.”

That time is coming soon for some of Ryder’s natural-gas trucks, said Scott Perry, a spokesman for the Miami-based company.

“I’d expect our first group of used vehicles to be put on the secondary market sometime next summer,” he said. Ryder took delivery of its first natural-gas trucks in 2010.

“We have several hundred Class 8 sleeper tractors running 100% on CNG,” he said. “The majority of our natural-gas fleet is in the Class 8 space.” He noted that there also are some trucks that run on liquefied natural gas, along with “a few” diesel-electric hybrids in the mix. And he noted that the company is adding new alternative-fuel vehicles to its fleet.

“I look forward to seeing how the market will respond,” to those used trucks, he said.

Those results also may prove interesting to Chris Visser, a spokesman for the National Automobile Dealers Association, in McLean, Virginia, who said that it’s too early for the association to have data on actual sales of alternative-fuel vehicles.

“I expect that natural-gas trucks will command a premium over diesel, once they start getting into the used market,” he said.

But some believe that will take a while.

“It’s a bit early for the resale side,” Maurer said.

“It’s definitely too early to talk about resales of heavy-duty and medium-duty alt-fuel trucks,” added Charlie Riedl, spokesman for America’s Natural Gas Alliance, based in Washington, D.C. “Information that says the life cycles of these trucks is typically three years is not accurate. I think we’ll see people keep them seven to 10 years.”

Or longer, in the case of refuse fleet Waste Management Inc.

“We have more than 3,000 alternate-fuel trash trucks, and we haven’t sold any of them,” said Marty Tufte, corporate fleet director for WM. “We run them until they fall apart, so we have no knowledge of resale value at all.”

Waste collection and transfer vehicles are the fastest-growing natural-gas vehicle segment, NGV America said, with about 7,500 natural-gas refuse and recycling trucks operating across the country. And 55% of new collection trucks on order are powered by natural gas, the group said.

But how natural-gas trucks hold up for second owners when they enter the used market could be a key consideration for buyers, said Brian Garner, vehicle remarketing manager for ARI, a Mount Laurel, New Jersey-based fleet-management company.

Garner said there is “the belief by some that alt-fuel vehicles will not last as long as conventional units, especially those powered by diesel fuel.”

Ryder’s Perry noted that natural-gas engines do have maintenance concerns that differ from the diesels many fleets rely on.

For one thing, they have spark plugs, which diesels, of course, don’t have. “When maintaining spark-ignited natural-gas engines, you have to take into account these maintenance intervals,” he said.

Natural-gas engines also require different specifications for engine oil than diesel. “They use a different product and have a different change interval, so there’s a little higher frequency of service and level of service, and parts cost,” he said.

Periodic inspection of CNG tanks is another consideration, Perry said. “Right now, regulations require inspections to be done every 36,000 miles, so that could be two, three or even four times a year that we have to remove a vehicle from service and incur that time and expense,” he said.

Add it all up, and the financial case for natural gas becomes one to consider carefully, Perry said.

“We have seen a higher cost per mile of natural-gas vehicles compared to diesel products put into service at the same time,” he said. “But those diesel-powered trucks are just now beginning to see the maintenance cycle for their aftermarket systems, so that will probably even costs out.”

Plus, the natural-gas trucks expand customer choice, Perry said.

“We tend to thrive on complexity at Ryder; the more complex configurations we can provide to our customers makes for a really differentiated value proposition,” he said. “With all the intricacies of natural gas, these trucks are right in our sweet spot,”