Are equipment prices the new diesel fuel?
November 14, 2012
When it comes to the potential to drive carriers out of the industry, equipment is becoming the new diesel fuel, says Bob Costello, the chief economist of the American Trucking Associations.
Before fuel surcharges, he explained last month during the ATA's annual management conference, "when wed see fuel prices go up, wed see a lot of companies go out of the industry," he said. "Now it's equipment that has the potential to drive more capacity out of the industry."
The average age of trucks is the highest it's been since ACT Research started collecting this data, Costello said, close to 7 years old.
"Some fleets are losing good drivers because their equipment is too old," he said. And it's not just a matter of driver comfort and driver pride in his ride -- today, there's also the federal government's new Compliance, Safety, Accountability enforcement program.
"We know some fleets with a high average equipment age are having a hard time keeping drivers because theyre afraid older trucks will get nabbed under CSA," he explained.
But it's easier said than done to go buy a new truck.
In 2006, a new Class 8 tractor cost roughly $95,000 and you could get about $50,000 on a typical trade-in, meaning you financed $45,000.
Today, that new tractor costs more like $125,000. If you have a tractor you can trade in for $50,000, you now have to finance $75,000. But if the older average age of that truck means you only get a $20,000 trade in, now you have to finance $105,000.
"In some cases we have seen the small fleets having to sell two trucks to get one new one," he said, and small fleet size on average is down 9%.
In addition, more fleets are turning to finance leasing, with about 30 percent leasing today -- about double what it was in 2000.
Author: Deborah Lockridge | Posted @ Wednesday, November 14, 2012 11:48 AM