Heikel attributes the pressure on pricing to the ballooning supplies of used trucks in the marketplace. Three or four years ago, sales were going through the roof, with a large number of customers leasing used trucks on three- to four-year contracts. Now, a lot of these contracts are up, and coupled with the number of fleets going out of business and equipment being repossessed by the banks, there is an overabundance of used trucks out there, Heikel explains.
Bang for Your Buck
Pricing pressure has caused the value of used trucks to skyrocket. "The value of the used equipment is the best ever," Heikel says. "There is good equipment out there at reasonable prices."
This certainly has been good for Arrow Truck Sales' business, especially coming out of the economic recession. Heikel says that while previously you could buy two used trucks for the price of a new one, you can now purchase three for the price of one new truck. And with the upcharge for new trucks outfitted with EPA 2010 engines, used trucks are even more of a bargain.
Heikel says a lot of fleets that have never bought used before are now looking into it for the first time. Specifically, some fleets are still running old equipment, such as 2002, 2003, and 2004 models. They've been waiting for the economy to pick back up, and now that we've started to see some improvement, these fleets are replacing the older models with'06 and '07 used trucks.
Arrow Truck Sales has also seen quite a bit of traction with its exports. International sales are up in the Middle East, Africa, and Central and South America, Heikel says. The exchange rate has made the U.S. truck market that much more appealing to these areas abroad.
In particular, the company has seen success in Iraq, as the country has undergone major changes. There's more commerce there now, and the area has come around from where it was a few years back.
The company has not been as lucky with the Russian market, as new regulations in the country have stifled sales. In terms of trucking regulations, Russia has become aligned more with Europe, adopting rules related to weight, length and the environment. As a result, U.S.-made trucks are no longer compatible with Russian rules, Heikel says
When looking ahead into the next year, Heikel expects the used truck segment to see a lot of activity, especially ahead of sales of new trucks. In terms of volumes, the segment is in a good place at the moment: "We are selling very well right now," he says.
As the economy continues to improve, demand for used trucks should continue to grow and prices will firm up and get back to more normal levels, he says.
The company says that the used truck industry is evolving into one that caters to fleets that are buying as a smart business decision, rather than an individual buying equipment.
Arrow Truck Sales offers its customers extended warranties included in the price of the truck, as well as leasing and financing options. The used truck dealers of today are evolving to look more like a new truck dealer, and those that want to survive, should start making changes to the way they run their business, the company says.