‘Sporadic’ Used Truck Gains Encourage Class 8 Dealers

This story appears in the Sept. 14 print edition of Transport Topics.

While sales of new Class 8 trucks continue to languish, several used truck dealers said they have noted recent “sporadic” increases in business that they believe could signal a market bottom. However, they added that financing problems were restricting sales.

Marty Crawford, president of the Used Truck Association, said that some retail and wholesale dealers have seen enough activity this summer to make them “very excited” that the market has turned around.

However, registration and price data from the second quarter of the year indicated the market was still anemic.

“Business seems like it’s sporadic,” Eddie Walker, owner of Best Used Trucks, Fort Worth, Texas, told Transport Topics. “I talk to a lot of other dealers, and they say sometimes, ‘People are coming in and doing business’ and ‘Holy cow, I haven’t seen a week like this in months and months,’ and you get up the next day and there’s nothing, and nothing for three or four days.”

Walker said that tight credit was a major problem.

“We see a little bit of change, a little bit of turn, and if we could get the financing, I think people would start coming back to the table,” he said.

“We’d love to step up and start doing business with first-time buyers who might have mediocre credit, which wasn’t a problem before, but the finance companies cut us off and haven’t come back yet,” Walker said.

Crawford said both wholesale and retail dealers have told him that July showed a turnaround.

“I’ve talked to a lot of dealers who had a good July on the retail side,” Crawford, wholesale buyer for Arrow Truck Sales, based in Conley, Ga., told TT. “In Arrow, wholesale Class 8 is starting to pick up some. We’re getting more inquiries from both domestic dealers and importers. It’s not dramatic, but it’s noticeable.”

Ron Corley, an owner of used truck dealer AmeriTruck, Charlotte, N.C., which he has run since 1963, was slightly optimistic.

“Sales have been sporadic, with some months that were great across the country, and we thought that we had pulled out, but then the next month is bad,” Corley told TT. “July was very good for us and for dealers nationally, but August turned out to be a terrible month. We haven’t seen an upturn yet, but the worse seems behind us.”

So far this year, new Class 8 sales are down one-third from the lackluster performance of 2008. At the same time, used truck prices have remained low, a factor in financing problems, and vehicle registrations were low in the second quarter.

“Comparing 2009 to 2008 from May through July, there has been a 43% decrease in used truck prices, and it has been a steady drop,” Terry Williams, editor of the Truck Blue Book, an industry guide for vehicle valuation, told TT. “From July to August — with only preliminary reports that could change — we’ve seen a 15% decline.”

Polk Commercial Vehicle Solutions said Class 8 registrations increased just 3.2% in the second quarter, which Gary Meteer, Polk’s senior commercial and aftermarket account director, said was “an indication of low demand.”

“People can buy good, clean equipment out there, but the fact is that they’re not taking it,” Meteer said.

Dealers said tight credit was hampering any turnaround.

Jason Rush, principal of Cobalt Finance, an independent firm in Phoenix that specializes in used Class 8s loans, said the credit markets had turned so negative last year that he shut down operations for 10 months. He restarted his business in June.

“We’re basically now using only a smaller supply of our own money and outsourcing and working with the capital of larger institutions, when before, we used only our capital,” Rush told TT.

“What’s happened is, we as a company have had to tighten our underwriting guidelines to be-come far more restrictive on who we’re financing, and this has happened industrywide,” Rush said. “Right now, unless you have a lot of cash, perhaps 30% or 40% down payment or additional collateral, plus good credit, it’s impossible to get financing.”

He said that first-time buyers, who often entered trucking with older equipment, have been particularly hard-hit.

“Older equipment that they might have leaned to is not as desirable to banks because of the glut of it,” Rush said. “There’s so much out there that has been repossessed, that the value has become so low and the condi-tion is so poor. It’s made it very difficult to get those people financed.”

Steve Waters, vice president of used truck operations of Navistar Truck Group, a division of Navistar Inc., said that his division operated with more opportunities because it had its own finance group.

“We actually sold more units this year to date compared to last, but only 5% or 10%, and the value of those sales has been impacted by devaluation in used truck prices,” Waters said.

“I’d say we’ve seen a 25% to 40% drop [in prices] from the peak, and that’s not new news to anyone.”

He said that, in another change from the recession, larger fleets that usually buy only new trucks were coming to his division.

“Traditionally, our market has been dominated by those who usually buy one to five units,” Waters said. “We have more and more . . . larger fleets come into the used truck market to supplement their fleet. It’s not uncommon to see opportunities of 20 to 100 units today” in a single sale.