Used Trailer Prices Plummet as Fleets Delay Replacements

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

Thousands of used trailers are sitting unsold and gathering dust, as freight demand remains tepid and carriers that would typically up-grade their fleets are postponing purchases, spending their money on fuel instead, according to industry experts.

“We are in uncharted waters,” said Bill Tirrill, vice president of sales for Fleetco, a Tennessee-based trailer dealer. “The market was slowing down a year ago, but not to the extent it is now. For every call we get about someone buying equipment, we get two from people that are selling.”

Charles Willmott, chief executive officer of WillGo, a used trailer dealer in McLean, Va., estimated that used trailer valuations have fallen 25% in two years, the largest decline in a decade.

“The used trailer market is lousy,” he said.

A 2000 model dry van trailer that was worth $12,000 two years ago would be worth about $10,000 in 2008 in a normal market; instead, that equipment now is selling for about $7,500, Willmott said.

“The market hasn’t really recovered” from 2005-2006, said Ken Vieth, general manager of A.C.T. Research. “Since we hit the soft freight environment in the fourth quarter of 2006, things haven’t gotten better. When you have marginal freight growth and excess capacity, you end up not using all the equipment.”

More used trailers are available because fleets boosted their purchases in recent years and newer equipment lasts longer because of improved quality, Vieth said. As many as 100,000 trailers a year enter the used market now, more than double the pace in the mid-1990s, Willmott said.

Measuring exactly how far used trailer prices and sales have fallen is impossible, Vieth said, because there are so many dealers and sales outlets that the information can’t be gathered efficiently.

With their costs high and demand low, fleets are being pinched.

“Some larger fleets that would buy in volume are caught,” said Brian Prall, vice president of sales and marketing for Stoughton Trailers. “There is pressure for them not to spend more capital without higher demand.”

“At the same time, if their assets are aging they would like to be in the market for equipment,” Prall said. “Anybody who is interested in talking to us about new trailers likely is interested in talking to us about their used trailers. It’s symptomatic of excess capacity.”

“The 1-to-5-trailer orders are still out there,” Tirrill said. “The 20-to-50-trailer buyers are not; they don’t want to take on more debt.”

“Fleets aren’t buying because the profits aren’t there, diesel prices are high and freight demand is soft,” said Dave Gilliland, vice president of branch sales and operations for Great Dane Trailers. He estimated that used trailer sales have fallen at least 10% in the past year.

However, “there is a solid market for good late-model used equipment,” he said.

“They (medium-sized fleets) would buy new under normal circumstances, but we are in anything but normal circumstances, with high fuel and weak demand,” said Dudley Gayman, director of sales and marketing for used trailers at Wabash National Corp. Customers are attracted by price differentials between new and used equipment that can be two-or-three-years old, he said.

Prices of new trailers have risen as much as 12% because costs of components, such as aluminum, steel, wood and tires, have risen, Tirrill said.

New dry-van trailers now cost approximately $30,000, while 2005- and 2006-model trailers typically cost approximately one-third less and can be bought for as little as $15,000, according to Truckpaper.com, a Web site that has more than 22,000 trailers for sale.

New trailer prices may be rising, but sales fell 51% in the first five months of this year from the same period of 2006, and are 20% below the same period of 2007, according to A.C.T.

Higher component prices are helping at the other end of the market by boosting scrap value. Old trailers that previously sold for $500 now have $1,500 in scrap value, said Tirrill.

In between the late models and the scrap candidates are older models that are still saleable.

Ryder System, which sells between 4,000 and 5,000 used trailers a year, sees that market as stable, said Gregg Nierenberg, group director of asset management and vehicle sales.

Ryder sells equipment that typically is eight years old, putting trailers on the market when they’re retired from leasing or contract carriage fleets, targeting smaller customers.

“The majority of my customers for used tractors and used trailers are owner-operators and those with relatively smaller fleets,” Nierenberg said.

The timing for a turnaround is uncertain.

“It will take a stabilization or lowering of fuel prices, improved carrier profits and higher freight levels to stimulate the market,” Gilliland said.

“It is a great time to buy and a terrible time to sell,” Tirrill said. “We go through these cycles. We don’t know when we will come back — certainly not in 2008.”