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Chip shortage pushing capacity-starved fleets to used equipment

In time of necessity, a late-model used truck will do just fine

The shortage of semiconductors for new trucks is causing some fleets to buy late-model used equipment. (Photo: Jim Allen/FreightWaves)

The shortage of microchips that run practically everything in a truck is stretching out a hot market. It is forcing fleets that need trucks now to search out late-model used equipment.

Recent vintage sleeper cabs and daycabs with automated manual transmissions, safety equipment and decent fuel economy are in big demand.

“Customers were already looking for low-mileage used trucks instead of waiting for a new truck,” Chris Visser, senior analyst and commercial vehicle product manager at J.D. Power Valuation Services, told FreightWaves. “The chip shortage has heated up demand even more. 

“The end result is used truck prices will see more upward movement than we had predicted before we knew about the chip shortage.”

Prices for used Class 8 trucks declined 7% in January compared to December, according to ACT Research. But as new truck orders mount and backlogs grow, delivery times are being pushed out to early 2022 for the most in-demand models, like sleeper cabs.

Secondary market strength

“The question of whether new truck buyers may turn to the secondary market, if new truck production and availability is unfavorably impacted by mounting supply chain concerns, appears to be back on the table again,” said Steve Tam, ACT vice president.

Where a glut of used sleepers existed into the middle of 2020, they are now getting hard to find.

J.D. Power’s benchmark 4-year-old 2018 model sleeper sold in January for an average of $51,179, up $4,269, or 9.1%, from December. Prices were higher for every model year from 2014 to 2017.

“The supply/demand relationship should stay favorable longer than predicted, possibly into the third quarter,” Visser said. “Of course this assumes macroeconomic conditions remain within expectations.”

Cashing out

Fleet Advantage, a Fort Lauderdale, Florida-based provider of data-driven analytics to help fleets achieve lower total cost of ownership, began a sale/leaseback program last May to help fleets monetize trucks idled during the pandemic.

The sale/leaseback program generated about 10% of Fleet Advantage’s $445 million in lease originations in 2020, Brian Holland, Fleet Advantage president and chief financial officer, told FreightWaves. 

“We’re focused primarily on late-vintage, low-mileage vehicles which have all the requisite safety equipment and are environmentally responsible,” he said. “We really are offering a premium asset in the secondary market.”

New truck constraints

Combining its used truck business with deliveries of several thousand new trucks a year, Fleet Advantage is able to avoid offloading trucks at wholesale or through auctions. The constraints in getting new trucks are likely to continue until enough semiconductors are available.

“It is driving demand. It’s going to drive pricing. And we’ll see that probably accelerate as we go through the year as the supply of new equipment starts to tighten,” Holland said.

Ryder System Inc. (NYSE: R)  updated its Fleet Buy-Out Program in mid-February. It operates a lot like the one offered by Fleet Advantage. Customers trade in their fleet and lease new trucks, freeing up cash tied up in assets.

“Ryder’s had a sale/leaseback program for a number of years,” Holland said. “It’s been somewhat dormant. I think they just dusted it off.”

Separately, Navistar International (NYSE: NAV) on Monday began offering a free one-year, factory-backed warranty for engine and aftertreatment systems on 2018 and newer on-highway International LT and RH models.

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Click for more FreightWaves articles by Alan Adler.

Alan Adler

Alan Adler is an award-winning journalist who worked for The Associated Press and the Detroit Free Press. He also spent two decades in domestic and international media relations and executive communications with General Motors.