It may be a better time than you think to buy a used truck, and there are more options than ever out there. For one thing, “Money’s still cheap,” says Mike Spence, senior vice president, fleet services, for Fleet Advantage, a leasing and asset management and consulting company that also sells used trucks.
Notwithstanding the recent Fed rate hike, interest rates are still at historic lows. And while prices of today’s complex, low-emissions new trucks have soared, depreciated used trucks are affordable and can be nearly as reliable. Supplies are growing and prices are coming down as thousands of 3- to 5-year-old trucks are coming into the market.
Dealers and factory outlets
New-truck franchises – often called OEM (for original equipment manufacturer) dealers – have used-truck lots stocked with vehicles that have come in on trade or from leases. Many truck brands are the same ones a dealer sells new, but other makes will also be present. OEM dealers know a lot about the products, as well as about component and factory warranties and how they can be transferred and extended.
Dealers often work with factory used truck organizations such as Daimler Trucks North America’s SelecTrucks and Navistar’s Diamond Renewed. These stock thousands of vehicles at lots around the country, and work with OEM dealers to balance supplies. Units are systematically inspected and serviced, repaired, detailed and refurbished as needed, then sold at retail. Customers can expect (and should insist on) DOT annual inspections as part of a deal, and sales reps will arrange transfer of unexpired warranties on chassis and components to new owners.
“For trucks that do not have remaining coverage, and/or for customers that want to take the belt and suspenders approach, most OEM used truck programs offer some type of stand-alone used truck warranty offering,” says Drew Backeberg, president and general manager of Daimler Trucks Remarketing.
DTNA’s SelecTrucks provides a 60-Day Buyer’s Assurance coverage that is designed to cover most potential failures that could occur within the first few months of ownership, Backeberg says. Several other warranty coverages are offered, from six to 36 months and 50,000 to 300,000 miles.
“Depending what our customer selects, warranties can cover internally lubricated parts, as well as bolt-on components (turbos, injectors, water pumps, etc.) and the aftertreatment system.”
Daimler recently began offering Select warranties for exhaust aftertreatment systems on Cummins and Detroit Diesel engines in used Freightliner and Western Star trucks. It covers the diesel oxidation catalyst, urea injection equipment that’s part of selective catalytic reduction, and the diesel particulate filter. All those items could otherwise add up to $10,000 to replace, the company says.
Navistar’s Diamond Renewed organization has 14 retail locations in the U.S. that sell used Internationals and other makes direct to buyers. It also wholesales them to dealers, and exports to customers in foreign countries. David Gerrard, senior VP for distribution, is proud of a refurbishing program that’s been running since 2013 in Indianapolis and two other locations. It reconditions used trucks and concentrates on correcting problems with troublesome MaxxForce diesels.
“Diamond Renewed has put a critical focus on trying to recover performance and value to our EGR engines,” he says. Reconditioning includes a 180-point inspection on the truck as a whole, “but the big focus is on the engines, on the EGR valve and cooler cores. The latest EGR valve was released in June 2013. We are using the same technology as on N13s. We have had considerable success with 2,000 of them, and sold half of those. I wish we had 2,000 Diamond Renewed units out there. We track those out there and their performance has been considerably better” than earlier engines.
Paccar Financial stocks former leased trucks, mostly Kenworths and Peterbilts, at dedicated lots, and works with dealers in reselling others. Mack and Volvo each have a website listing Premium Certified trucks available at their dealers, and Volvo owns Arrow Truck Sales, which operates semi-autonomously and stocks most makes and models.
Except for the fact that Jordan Truck Sales in Carrolton, Ga., deals with used equipment, it has the look and feel of a new-truck outlet: huge lots with hundreds of power units and trailers parked in orderly rows; a 14-bay service shop; a recently built parts building; and a sales office that’s rather busy, as the independent dealer sells 400 to 600 units a year. Ronnie Jordan, owner and president, says a crew of drivers does nothing but transport trucks as they are acquired at auctions and other sources. And it has an extensive reconditioning facility.
“We have a 50-man detail crew,” he says. “We wash, wax and buff. We have a paint booth to paint frames, but we farm out complete paint jobs. We use jeweler’s rouge to buff out the wheels and paint, and install chrome.”
The dealer offers warranty coverage through well-known suppliers of rebuilt and remanufactured components that his mechanics install, and sells policies through National Truck Protection and other sources that are backed all over the country.
Used trucks make sense for truckers wanting to get started in the business, he says. “With a used truck your down payment and the monthly payments will be less [than a new truck], and you’ll stand a chance to get whole [build up equity] a lot sooner.”
Auctions add excitement and entertainment to truck shopping. Buyers can see and touch the offerings and listen to their engines in person, if not test drive them. Ritchie Brothers is probably the best-known operation for its permanent auction sites where extensive collections of trucks and heavy equipment are assembled for auction days. Staffers also travel to scores of other venues. Buyers who prefer to stay home can bid online, as well.
A completely online operation is Truck Planet (www.truckplanet.com). It was launched in 2013 as a division of Iron Planet, a seller of construction, agricultural and other off-road equipment.
“We launched it with our first partner, Ryder, and we sold 219 trucks on that day,” says Paul Blalock, vice president, sales.
Unreserved auctions every Thursday are run simultaneously with Iron Planet. Unreserved means a truck will sell for whatever someone’s willing to pay, even if the seller would’ve wanted more. At other times, the company runs reserved auctions with minimum bids required, plus classified ad-type listings.
Equipment can be anywhere in the U.S., Canada and Mexico, Blalock says. Vehicles remain at sellers’ premises, where they’re inspected and photographed. Prospective buyers have two weeks of pre-bid time when they can study photos and inquire about specific vehicles, but they may not go onto sellers’ properties to inspect vehicles themselves.
“We inspect everything we sell with full-time employees and contractors who are inspectors. We post an inspection report online with 75 to 100 pictures, and we financially stand behind the inspection with what we call an Iron Clad insurance program,” he explains. “So a customer can go online, look at the pictures and the report, and bid accordingly.”
On auction day, each item has a time slot so interested bidders can tune in when the vehicle comes up. The bidding will usually start around $5,000 and go up. A heavy truck sells for $25,000 to $50,000, though some may hang near the starting bid. “Euphoria” sometimes develops over highly desirable trucks, which drives up the price, same as at an on-site auction, Blalock says. Occasionally a truck doesn’t sell, so the starting price will be reduced by $1,000 and it’ll go up for auction the following Thursday. He insists, “Eventually it will sell.”
Buyers pay by wire, titles are overnighted from the company’s headquarters in Pleasanton, Calif., and buyers then arrange to have the trucks picked up and transported. For the very small percentage who are not happy with their purchase, he says, there’s a claim process and Truck Planet people are intent on making things right.
Last month’s announcement that the Federal Reserve Bank will raise its prime rate by a quarter-point made big news, partly because the Fed’s rate since the start of the Great Recession has been zero. This has led to some of the lowest rates for all types of consumer and commercial loans in many years. Thus the 0.25% hike will have very little effect on loans for used trucks, and it pays to trade up.
“Rates are as low as 3 to 6%, depending on your credit,” says Mike Spence at Fleet Advantage. “Others are 8, 9, 10%. A quarter-point shouldn’t deter anyone from moving up to a newer vehicle, especially these new, fuel-efficient vehicles. A one-quarter percent hike on a $70,000 to $90,000 loan is going to add only 20 to 30 bucks a month. And if you go from a 2008 to a 2013 or ’14 tractor, you’re going to bump your fuel economy by a half a mile per gallon. You’re looking at saving $4,000 a year in fuel, and there’s $350 to $375 a month.”
There’s also a reduction in your maintenance costs, Spence says. If you trade up from a 6- or 7-year-old tractor to a one- or two-year-old model, “your cost per mile will go from 15 to 20 cents just for maintenance to 6 to 8 cents a mile. Multiply by 100,000 miles and that’s pretty significant. Some people like to operate with no payments, but then you have high maintenance costs, and then there’s driver satisfaction and retention with a newer truck.”
Buyers with poor credit can get subprime loans from companies such as Freedom Truck Finance, whose rates start at 18% and buyers need a 20% down payment to demonstrate commitment. The minimum loan amount is $15,000 and the maximum is $150,000. Most of its loans are for used trucks, and condition is more important than mileage, says Leigh Beasley, director of marketing. A relatively new venture, Freedom started out financing Class 8 trucks but recently added Class 6s and 7s. The lender has ample money available and can arrange Freedom warranties through TruNorth.
“We are not credit score-based, we’re common sense-based,” Beasley says. “We work with dealerships to personalize deals for customers. For example, they had great credit in 2006-07 and got behind during the recession, and now they don’t. We want to give them the opportunity to get back on the road.”