The used market gets tougher

While used vehicles remain a popular option for buyers, it is becoming more difficult for the dealers to profit 

The continual increase in the price of new trucks and trailers has created an affordability problem for some road-transport operators and potential buyers of new commercial vehicles.             

This has enticed buyers to investigate the used-vehicle market and, in some cases, buy a used truck or trailer instead of a new unit. This growing trend has kept the used truck and trailer market buoyant.

However, although sales of used trucks and trailers have remained steady over the last couple of years, and customers are prepared to pay a fair price for these pre-owned vehicles, dealer profit margins have dropped, due to an increase in competition and the cost of refurbishment.

The recent steep prices of replacement parts (that are required to get used vehicles and trailers into a roadworthy and saleable condition) has been one of the main factors contributing to the reduction of profit margins. Another factor has been the increase in workshop labour costs.

In addition to dwindling profit margins, dealers of used heavy commercial vehicles are also finding it harder to replenish their stock, especially in the four- to eight-tonne payload segment of the market.                                                                                 

Customers have also become more selective in terms of the make and model of used truck or trailer that they intend to purchase.                          

There is a greater demand for trucks and trailers with a good history of high durability and good back-up service from the original manufacturer and dealer network. This makes the task of sourcing stock and paying the right price for the used vehicle more difficult for the dealers.

From my observation, the extra-heavy segment of the used-vehicle market appears to be flooded with used 6×4 vehicles. There are just too many of these vehicles for sale and not enough buyers.

One of the factors creating the oversupply of used trucks in this segment is that many of these vehicles were originally purchased with buy-back or trade-back agreements, whereby the dealer and/or manufacturer agrees to take the unit back after a specified time. This has had the effect of flooding the used-vehicle market. 

In addition, operators who purchased new 6×4 trucks without buy-back agreements trade in their vehicles early, before they need expensive replacement of driveline components such as engines, gearboxes and differentials. This adds to the number of second-hand vehicles on the market.

Another difficulty facing the used-vehicle dealers is that customers are reluctant to buy a used truck with high mileage on the clock unless they get it at a very low price. I am not saying that these high-mileage units are not saleable; placed in the right application, and bought at the right price, they should perform well. 

Notwithstanding the trading difficulties in the used commercial-vehicle sector, it remains a good business in which to be, provided that dealers buy the right stock at the right price and offer their customers a sound vehicle that has been refurbished and is in a roadworthy condition.

VIC OLIVER is one of this country’s most respected commercial vehicle industry authorities, and has been in this industry for over 50 years. Before joining the FOCUS team, he spent 15 years with Nissan Diesel (now UD Trucks), 11 years with Busaf and seven years with International. Do you have a comment or thought you would like to share based on this column? Visit www.focusontransport.co.za and have your say!