Sometimes, saying goodbye can be hard. For the pre-owned vehicle industry, that would certainly be understandable when it comes to turning the page on 2014, which turned out to be solid year for sales. Yet the industry remains buoyant—and for good reason: industry experts forecast 2015 to be even stronger.
To fully understand where the market stands and where experts believe it’s headed, let’s quickly look at how 2014 ended:
- Solid year for pre-owned truck sales: Just how good was 2014? Pre-owned truck sales jumped 6%—growing from 235,000 units sold to 250,000—spurred by trade-ins of late model, low mileage inventory as well as the rising cost of new equipment alternatives.
- Pre-owned prices increase: Reflecting a shortage of desirable pre-owned trucks throughout the past year, pre-owned truck prices rose steadily as well. Used vehicle sales volume (and pricing) fluctuated month to month throughout 2014, but began stabilizing in December as more desirable used inventory entered the market.
Looking ahead, experts believe 2015 will be an even better year for pre-owned truck sales and pricing, with the following trends emerging:
- Pre-owned offers a compelling price argument: Speaking with the publication SuccessfulDealer.com, Chris Visser, senior analyst and product manager of ATD/NADA Official Commercial Truck Guide, summed up the prevailing outlook for used trucks, “Late-model used iron was and will remain a compelling alternative to new trucks, thanks to the steadily-increasing price of new iron. At just under $60,000, the average used sleeper tractor with 450-500,000 miles is less than half the price of a new truck.”
- Replacement cycle to drive pre-owned sales: According to research giant Frost & Sullivan, 2015 represents a milestone year for the equipment replacement cycle. In a recent interview with FleetOwner.com, Sandeep Kar, global director of commercial vehicle research for Frost & Sullivan, says, “Our research suggests the equipment replacement cycle peaks every fourth or fifth year, thus suggesting that 2014-2015 will be the next cycle peak ahead of a broader economic upturn in 2016.”
- Improving pre-owned durability attracts buyers: Frost & Sullivan sees continued strength in pre-owned truck models that solve key problems for specific buyers. “Owner-operators and smaller fleets will still be the major drivers of used truck demand,” Kar told FleetOwner.com. “That’s because the durability of trucks keeps improving—keeping TCO [total cost of operation] expenses down—and they still are not comfortable with the higher sticker prices for new trucks due to mandated 2010 emissions control technology.”
- Emissions making a difference: Emissions issues stand to be even more pivotal in pre-owned vehicle buying decisions going forward. In February 2014, President Obama ordered the Environmental Protection Agency (EPA) to draw up rigorous new fuel and emissions standards for heavy-duty trucks. The new regulations are expected to go into effect by March 2016.
While there is industry support for the Corporate Average Fuel Economy (CAFE) standards, new vehicles that are compliant will be more expensive to buy and maintain. With fleet owners already absorbing extra costs for Electronic Logging Devices (ELDs), Electronic Onboard Recorders (EOBRs), among other technology, late-model pre-owned trucks with less complex fuel systems are in high demand.
- Inventory gets younger: As the year progresses, experts are also predicting that pre-owned vehicle sales will shift noticeably toward “younger” inventory. As ATD/NADA’s Chris Visser told SuccessfulDealer: “The mix of available used trucks is essentially two full years younger than in 2013. This trend reflects the disappearance of desirable 2007 models as well as the shift back to shorter trade cycles following the recession.”
With these powerful trends backing the pre-owned truck industry, 2015 may well be the year that we change the phrase “out with the old and in with the new” to “out with the new (trucks) and in with the pre-owned.”
