Missing in action
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Words: Steve Banner
We talk to Paul Young, senior regional asset manager at Paccar Financial, and ask: where are all the used trucks?
The question haunting dealers nationwide as they hunt for retailable second-hand stock with increasing desperation is: where have all the used trucks gone?
Low new truck registrations in recent years have not helped – if something has not been sold new, then clearly it cannot eventually be sold used – and nor has the decision by some major leets to extend the leases on their existing vehicles. Consequently, those vehicles are not being sent back to lessors and released onto the second-hand market, either directly or through dealers.
Well-known on its home turf for its Kenworth and Peterbilt brands, US truck builder Paccar is DAF’s parent company. Funding between one-in-three and one-in-four of all new DAFs sold in the UK, Paccar Financial has a signiicant role to play in the disposal of ex-contract used XF105s, CF85s and so on.
“We’re in a situation where about 50% of our contract hire customers are extending their leases and that percentage is climbing,” says Paccar Financial senior regional asset manager Paul Young.
“And the average extension period has gone from six to 12 months, if not longer.
“The number of guaranteed buy-back ex-leet vehicles being returned to us is down to about a half or even a third of the level we saw in 2009,” he continues. “As a consequence, I’ll have just about enough trucks coming in this year to keep DAF dealers and the selected independent dealers we work with that want used vehicles to sell happy, but no more.
“The truth is that there’s going to be a shortage of used trucks over the next three to four years,” he adds.
“It won’t really come to an end until the new market is consistently achieving annual registrations of approaching 40,000 units, and that’s somewhat more likely than seeing it consistently approach 50,000 units,” Young says.
Higher new sales will eventually mean that there will be more second-hand examples around. “In the meantime, dealers who want used stock are going to have to investigate additional lines of supply,” he says.
They will have to look more closely at any trucks being offered as trade-ins to see if they might be retailable and see what other dealers, and the auctions, have got to offer.
Rental companies
“It also means talking to some of the bigger rental companies, which may have their own used vehicle disposal operations, about whether they’ve got any trucks they’re willing to sell,” Young says. “It means talking to some of the bigger inance houses about how they dispose of vehicles too.” Young goes on to warn that over the coming months Paccar Financial could see even fewer of the DAFs it funds coming back from operators than it is now.
“Remember that with two-thirds of our contracts, the operators are not obliged to send the trucks back to us,” he says. “When demand for used trucks picks up, they often decide to keep them and sell them themselves.” With demand for second-hand models so healthy, it will scarcely be surprising if that is the route many of them pursue in the coming months. At least that means vehicles will become available, albeit via a channel other than Paccar Financial but, as pointed out earlier, the paucity of new registrations in recent years means that the number of used examples pumping through the system is likely to remain inadequate.
“I know this suggestion may send some people running for the hills but, if you’re selling new trucks now, then there’s an argument for putting them out on two-year contracts in controlled numbers because of the money they are likely to fetch in a couple of years’ time,” he says.
Yet while the shortage of late-plate second-hand vehicles has driven prices up – Young believes they are now returning to a more stable, sensible level – a signiicant gap remains between the high price of a new truck and a late-registered one. “Customers are increasingly asking not how much a particular used truck cost when it was new, but how much a new example would cost today by comparison,” Young observes.
Having looked at the igures, it would not be surprising if in some cases operators that have traditionally bought new opt for late used instead, placing even more pressure on the fast-diminishing pool of late-plate stock. Young contends that the used shortage means retail customers will have to alter their expectations.
“Operators will have to understand that it will not be as easy as it once was to buy twoto three-year-old trucks,” he says. “They may have to think about opting for fourto ive-year-old examples instead.” With so few vehicles coming back to Paccar, Young is aware that some dealers will believe they are not getting their fair share and that accusations of favouritism, however unfair, will be thrown around.
“To try to counteract that, and following a successful formula developed by our parent company in the US, we held a closed auction at our Leyland plant last year,” he says.
Trading agreements
“It was open to DAF dealers and a selected number of independent used dealers we deal with. They have trading agreements with us.
“Half-a-dozen independents attended and representatives from all our dealers were present,” Young continues. “Seventy-nine trucks were auctioned (to be honest we struggled to ind that many), they all sold, and fetched good prices – more than we expected them to.
“About three-quarters of them went to DAF dealers and the feedback we got from them was that they really enjoyed the experience,” he adds. “Normally they take more like 60% of the vehicles we dispose of.
“We spent some time preparing them to forecourt standard before the auction,” he says. “That’s not something we’d do to the trucks we normally dispose of.
“The people who bid for them knew that they’d been through the workshop, had all the cosmetics done too, and that they could be driven to their sites and put on display with minimal additional attention.” Young is concerned that used prices will continue to rise because of supply and demand being out of kilter, they will reach the dizzying peaks achieved in 2007, then come crashing down again as they did in 2008. “I don’t think anybody in the used business wants to see that,” he says.
That’s because stability is ultimately good for business. Instability isn’t. ■