Despite Hot Used Truck Market, Play the Long Game
With the first half of 2021 in the rear view, now is the time to start budgeting for 2022 assets.
Heavy truck and trailer manufacturing slots are all allocated for 2021, and we are now receiving communications from the OEMs that their first quarter slots for 2022 are allocated as well. We all have been hearing about the shortage of new trucks, believe what you are hearing.
New vehicle production is going to continue to be challenged with material shortages—primarily sensors and silicone chips, but more recently other materials as well. Did you know that the rising prices of lumber has affected the cost of steel? Home builders are looking for lumber alternatives to meet the continued demand for new homes. An increase in the cost of steel will have a direct impact on the cost of your new heavy trucks and trailers. Fleets that ordered new trucks are having to wait longer than anticipated to get their new equipment, which of course means they are having to hang on to their existing assets longer.
Extending lifecycles on current assets results in fewer trucks entering the secondary market. And we all know what it means when the supply of used trucks is small—the prices of those used trucks goes up. That is what we are currently seeing in the market—skyrocketing used equipment prices. Chris Visser, senior analyst and product manager at J.D. Power, said that in March four- to six-year-old aerodynamic tractors were selling for as much as $56,000 on the retail used truck market. He added that prices for late model tractors are up 70% over last year.
If you are selling used trucks, you are in the driver’s seat, so to speak. However, if you are the buyer be prepared to pay more for a used vehicle. After all these years in the trucking industry I know one thing for sure: these high used truck values will not last. They never do.
Used truck prices are a classic case of supply and demand and the availability of them mirrors what has occurred in the new truck market four to five years previously. All you have to do is look back at the history of new truck sales to see what will happen with used trucks.
This market is truly validating something I have said so often: You need to have a long-term plan for your fleet and make minor adjustments as the market changes. If you have not already developed your capex budget for 2022 and placed your orders with the OEMs your business plan for 2022 is at risk. If you are in this position, you need to reach out to your fleet planning professionals and identify your asset replacement needs for Q2 through Q4 of 2022 as soon as possible.
Long-term planning is the key to success. These cycles come and go, but if you have a three-to-five-year capex plan it will serve you well in good times and bad.
At Corcentric, we stand ready to help any fleet bridge that gap. Now, more than ever, it’s crucial to make the right lease-versus-buy choice – those who do are more likely to emerge from the COVID crisis as industry champions positioned for growth. To learn how we can help, contact Corcentric today.