After a great summer with steady (e.g., low) volumes and stable prices, it appears the sun could be setting on a strong stretch for the used truck market.
Recent reports by J.D. Power (in its October Commercial Truck Guidelines) and KEA Advisors show volumes in the Class 8 used sleeper market are beginning to rise. Both reports attribute the rise to the loosening of capacity constraints that have impacted the OEM production channel for most of 2018. After months and months of waiting, North American fleets are finally receiving the trucks they’ve been promised.
While that’s great for the fleet community — new equipment heading into the busiest two months for shipping consumer goods — a sudden surplus of used trucks market could make for a Blue Christmas for anyone who makes a living in the used truck world.
With the 2018 Used Truck Association (UTA) Annual Convention set to kick off tomorrow, I am eager to see how those operating in the used truck space are preparing for this likely influx of inventory. Because one thing is for sure: you need to prepare for what’s ahead.
I don’t know how high volumes are going to rise. Though the stock market stumbled a bit last month the U.S. economy continues to grow. We are just a few months from setting a record for the longest continued period of U.S. economic expansion since World War II. Consumer confidence indexes are stronger than they’ve been in years, and even with an election underway as I’m writing this, I don’t think the results of today’s vote will impact the economy enough to trigger a sudden downswing or recession.
All of that is to say I think the volume rise we’re starting to see is going to continue. We’re not going to have a sudden correction where every fleet wants or needs to hang on to their used assets (like they did this spring when the assembly lines weren’t running — though I guess that could happen again on a smaller scale).
In talking used trucks with several experts recently, a couple key actions come to mind for dealers to withstand another volume-induced market shift:
Don’t let the tail wag the dog. You know that expression, right? What I mean by it is make sure your used truck department is involved in all major trade package agreements. Rising volumes mean lowering prices. You can’t have your new truck sales guys accepting trucks on trade at prices you were paying six months ago. The turnaround potential isn’t the same. Make sure all your trade in deals are evaluated by your used truck pros before they are accepted. And listen to what your used truck people say. If they tell you a deal is dangerous for your business and you still accept it, don’t blame the used truck department in three months when half of those trucks still haven’t been moved.
Know when to take the L. This goes along with that last sentence above. Sometimes a bad deal is just a bad deal. If you take in a truck for $X and your used truck department tells you the truck should be priced at $Y to sell by a certain date, take their word for it. Price it where it needs to be and if it doesn’t move, have a backup plan to drop the price or move it wholesale. No one wants to take a bath on a used truck but sometimes trucks just don’t sell for what they’re worth. Don’t risk losing money waiting for the perfect customer at the perfect price if you can make a move today to cut your losses.