Even during hot streak like this one, not every truck that makes its way into the used truck marketplace is destined for a high-dollar retail sale. Condition, specs and potential customer base all have a say in how much a truck can fetch in the open market.
Demand may be currently outpacing supply, but for used truck dealers looking to maximize margins for every truck they sell, understanding when to invest and when not to invest in a used truck is a key step toward sustained success.
One way to make a nice profit on a used truck with little investment is to sell it as-is. Though not always the right tactic for every truck, as-is truck sales offer dealers an option to move equipment that for whatever reason may face challenges if pushed into the conventional retail used market.
Additionally, while most as-is trucks only draw interest from small segments of customers, because they can be sold in the retail, wholesale and auction channels, as-is trucks are still capable of becoming solid moneymakers for dealers who are able to acquire them for a good price and market them properly.
According to experts familiar with the practice, determining which units are best to be sold as-is requires used truck dealers to ask and answer a few key questions before, during and immediately after an asset’s acquisition.
Price
The first and most obvious question is tied to cost. At what price can the dealer purchase the asset? Smart dealers know the eventual success of any used truck sale is disproportionately tied to an asset’s acquisition cost. The lower a unit’s upfront price, the more flexibility a dealer has to invest and market the unit and still make a profit.
“There’s a buyer out there for almost anything if you can get it priced right. But if you want to have the right price when you sell it you better get the price right when you buy it,” says Craig Kendall, used truck manager, The Pete Store.
At Neely Coble Company and now Velocity Truck Centers, Brandon Hess says his used truck department has a detailed evaluation process it uses to assess any potential trade-in and helps the company determine its offer price. Hess says the evaluation, which includes a questionnaire completed by the seller, encourages transparency for both sides, which often helps lead to smooth negotiations and transactions.
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Another way for dealers to ensure they don’t offer too much for a used unit is to perform a detailed service inspection before purchasing. Though this isn’t always an option, Kendall says just being able to do a walkaround of a potential purchase can help uncover issues that might impact a dealer’s valuation for a truck.
It also helps for dealers to purchase equipment from trusted partners whenever possible. Marty Crawford says that’s the preferred tactic for Jordan Truck Sales.
“We buy from fleets where we know they have good maintenance programs so we can be pretty confident in the trucks we’re buying,” he says.
Condition
Once a dealer takes ownership of a truck, a thorough inspection should begin, which will identify the cost to recondition the truck and help the dealer understand a potential retail selling price. More often than not, if a truck is destined to be sold as-is, it is during this initial post-acquisition inspection that a dealer will identify the reasons to do so.
“Once you know what the truck is worth you have to decide how much it’s going to cost to recondition it,” says Kendall. “How much would you need to put into it to sell it for the price you want?”
How much a dealer is willing to invest to recondition a truck should be based on a number of factors, including the unit’s specs, age, condition, acquisition price, ideal retail price and likely market demand. A reconditioning estimate that weakens or eliminates a dealer’s potential return on investment (ROI) through a retail sale is one common reason dealers consider an as-is sale, often through auction or wholesale channels.
It’s a simple cost-benefit analysis, says Mike Walker, West region sales director, used trucks, Navistar. “The best route on some trucks is to sell it as it was traded or received at wholesale/auction/retail based on best offer,” he says.
IAAA’s Jay Burgess says that’s how he evaluated trucks in his previous role with Vanguard Truck Centers.
“We were 100 percent in the retail business so if we ran a truck though the shop and discovered it was going to need X dollars in repairs, if that was over our [reconditioning] range, we would wholesale it out,” he says. “We didn’t want to invest in a truck where we couldn’t get our money back and we were not going to sell a truck we couldn’t stand behind.”
Crawford says Jordan Truck Sales has a similar philosophy, choosing to avoid as-is retail sales to maintain its market position and reputation. “Every dealer develops a certain clientele or a certain market. The market we target demands a product that it can go straight to work with,” he says.
Customer demand
But that isn’t to say trucks can’t be sold as-is in the retail space. When selling as-is trucks the key to success isn’t so much the channel as messaging. So long as a dealer is open and honest about a truck’s condition and why it is choosing to sell a unit as-is, buyers will inquire. That’s particularly true now with used truck supply levels so low.
Kendall says The Pete Store was recently contacted by a vocational customer who was in immediate need of a few specific trucks. The dealer didn’t have any at the time but soon acquired some, notified the interested customer of their availability and condition and sold them as-is days later.
“We told them everything we knew about them before making the deal,” he says.
Ryder does the same with its as-is truck inventory, which represents its third of three used truck product tiers, says Eugene Tangney, vice president, global vehicle sales. He says the company “provides full maintenance records for each vehicle in inventory,” as well as any service requirements if an as-is unit does not meet DOT compliance requirements at the point of sale.
Tangney adds while some of Ryder’s as-is trucks can be purchased and immediately put on roadways, he says most are purchased by fleets that intend to recondition them in advance of use or intend to repurpose them as donor vehicles.
“In both cases, as-is vehicles are highly valuable, as they can be fixed-up to extend the life of the vehicle or used as a cost-effective way to replace parts and accessories on active vehicles,” he says.
Navistar uses a similar tactic in managing its used truck inventory, Walker says. “If a customer has repair ability or an in-house mechanic where they think they can get the truck road-worthy, it is possible to make an ‘as it sits’ deal on the truck.”
Burgess looked for similar capabilities in potential as-is customers and notes he never tried to sell an as-is tractor to a customer unless he was sure they had the financial flexibility and mechanical aptitude to capitalize on the purchase.
After all, as-is trucks have inherent risk, both for customers who purchase them but are unable to maintain them and for dealers who sell them without disclosing their condition.
“We always told them everything we knew,” he says. “This is what we did, or didn’t do, and this is why the truck is that price.”
Finally, there’s the matter of market demand. Acquiring a used truck for a great price won’t do much good for a dealer if its customer base has no interest in the make or vehicle configuration. Nor will receiving a large batch of identical trucks into a market that can’t support that many retail sales.
For many OEM-branded used truck dealers, selling other brands’ trucks as-is to a dealer of that brand or across the country into a different market is a simple way to make some money on an asset that has limited value in their business. And in cases where one dealer is stocked up on a single model or configuration, using as-is wholesale channels to move excess inventory into another, stronger market can net sales for dealers in both regions.
Hess says he’s excited about using the latter strategy to help boost used truck sales in the Velocity Truck Center network.
“Having partner departments who can help absorb trades mean we don’t worry about having 50 of the same truck on the lot at the same time,” he says.
