Right now, the trucking industry is experiencing a big drop in the price of used trucks. Normally, this would be good news, especially for growing fleets. However, the problem is that many fleets already have a surplus of used trucks, which is creating a source of financial concern.
Why Are There So Many Used Trucks?
Roughly ten years ago, many trucking fleets were ramping up to meet a potentially huge increase in sales from retail, as well as importers. The increase was not as big as everyone anticipated, so now there are a number of fleets with a lot of used trucks. To compound this situation, the average price of used trucks has fallen about 22 percent. This is forcing fleets to hold onto their vehicles instead of selling them or trading them in for new rigs, and eat a big financial loss in the process.
The Financial Strain
Most fleets and independent drivers trade in their trucks before the warranty runs out, or before the 500,000 mile marker is reached. The cost of maintenance shoots through the ceiling after that much wear and tear has been put on a vehicle. With the decrease in value for used trucks, fleets have a much bigger gap to make up for if they trade in vehicles for new ones. Yet, holding onto used vehicles means an increase in the expense of maintenance and repairs.
The Future Rears Its Ugly Head
The excess number of used trucks and the subsequent drop in value is seen by some as poor timing. With Uber rolling out its freight brokerage service, and other companies getting ready to release self-driving trucks, the industry seems locked. Many of the new conversion kits to make trucks compatible with new technology or alternative fuels do not work with older models.
The Market Has Not Bottomed Out
As of now, many fleet owners are choosing not to run as many trucks as they had in previous years. This saves money on both logistics and maintenance, while keeping a good portion of the used trucks they own in good condition for when the market turns around. With a projected increase in demand for truckers, and economic growth, the trade-in value on used trucks should go back up again. However, industry analysts still say it is too early to give an estimate as to when that will be.