The medium-duty truck segment, Class 4-7 in particular, is different than any other segment in regards to remarketing and resale. Because of this, fleet managers are presented with unique challenges to overcome to ensure maximum resale on these units.
New truck orders are increasing steadily, which should result in an increased number of trade-ins. Current emissions regulations are increasing the price of newer-model medium-duty units, which is driving more people to the used-truck market. Additionally, gasoline-powered models are entering the market and the gap between gasoline and diesel prices is narrowing, which could strengthen used-values for some applications.
Currently, prices are stable for this segment. According to the experts at Black Book USA, this is mainly attributed to a lack of volume, still as a result of the economic downturn. But, as the housing market, commercial construction and the service industries pick up, the models are selling again, and the increased volume could impact values in either direction. One factor to keep in mind is the level of pent-up demand currently felt in this market segment, which could help prices remain stable in the face of increased future volume.
According to the experts at Black Book, reasons medium-duty need to be treated different than other vehicle segments include:
- Overall used supply volume. We are coming off of several years of lower than normal new medium duty truck sales that are just starting to increase again.
- Vehicle age at resale is higher than other vehicle segments. For example, cars and light-duty trucks primarily turn in one to four years, while medium-duty trucks stay in service a minimum of three years, but normally on an average of five years. Utility trucks can stay in service even longer, up to eight to 10 years.
- Overall condition of these units will be a little rougher, because these are work vehicles, used day-in and day-out, which will impact resale value.
- Higher mileage at resale, because they stay on the road delivering and picking up products, etc. while also staying in service more years.
- Wholesale channels used and the volumes of these channels, locations, and frequency. While some medium-duty trucks are included with the traditional auto auction circuit, traditionally these vehicles provide their best return at auctions focused on this specific industry.
- Fuel type, whether they are gasoline or diesel fueled.
“One particular impact that vehicle age can have on resale value involves short cycling, or remarketing a medium-duty truck early or at the minimum age (two or three years),” according to Ricky Beggs, editorial director for Black Book. “These newer vehicles are at a premium in the resale market, and would garner a higher resale premium than a similarly aged and lower-mileage light-duty truck model.”
Additionally, fleet managers should remember that medium-duty trucks have a different buying audience than some of their other vehicles. In some medium- and heavy-duty auctions the owner/operators are allowed to attend, unlike other auctions that are traditionally closed to only dealers.
“Cabover trucks are also growing in popularity, with new offerings coming out. More manufacturers are putting gasoline-powered medium-duty trucks in the market as well. Ford just came out with the gasoline-powered F-750 to compliment the already available gasoline F-650,” noted Charles Cathey, medium and heavy duty truck editor for Black Book. “This changes the mix of vehicles that will be coming to the resale market, and, in the past, the gasoline-powered models didn’t obtain the same, higher resale values that their diesel-powered counterparts did. This will be something to watch as these vehicles enter the resale market. “
Additionally, the cost of fuel has an impact on this segment’s overall resale value.
“Diesel fuel prices have been stable over the past six months, whereas gasoline has experienced a steady climb since January. This week alone, the gap between gasoline and diesel is very tight, approximately 30 cents. The last time it was that close was back in August of 2013. The gap is narrowing somewhat, and this will be interesting to see if this will impact the marketplace and strengthen the diesel products,” said Josh Giles, senior truck editor for Black Book.
Finally, changing and developing emissions regulations are raising the price of new trucks going to market, turning some fleets more toward used vehicles.
“Current emission standards come into play, especially for Class 6-7, which are focused on emissions that is raising the price of the new trucks and cost of entry, which should help the values of the used trucks as the people who don’t want to step up to the more expensive, newer trucks can purchase a used truck that still meets the emissions regulations without the premium price,” Cathey said.
By Lauren Fletcher
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Originally posted on Work Truck Online
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