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Fleets are finding value in new truck purchases


What is the formula to determine whether a new truck purchase is a good idea?

Heavy trucks can stay in productive service for years at a time, which creates an important question for fleet owners and owner-operators: When is the right time to buy a new or used big rig and put an older model out of service? The answer to this question will depend upon a number of factors, including the increased costs of operating an older and less-efficient vehicle, the potential market for freight work and the current price of trucks.

The market for Class 8 trucks is one of the determining factors underlying the trucking industry. When leaders in the sector buy new vehicles in large numbers, they are projecting confidence for the years ahead. Periods of new purchases may also be good times for driver comfort, as the new vehicles will possess features that weren't present on the older models they're replacing.

Running the math on new truck purchases
Fleets will make new truck purchases when the monetary advantages of an upgrade make sense. According to trucking analytics firm Fleet Advantage, buyers purchasing a new Class 8 truck in the early months of 2019 could secure thousands of dollars in savings by replacing 2015 model-year vehicles or older with 2020 versions.

The savings Fleet Advantage identified come from multiple sources, with fuel consumption being one of the most prominent. Even in the relatively short time between the 2015 and 2020 model years, original equipment manufacturers have significantly improved trucks' fuel efficiency. A new truck could save a fleet $6,048 in gas in its first year in operation.

While fuel is a major differentiator between old and new vehicle costs, there are other factors at play, including the expenses of maintaining and repairing vehicles. A five-year-old truck may not seem to be materially different from a newer model, but the gap in reliability and expected upkeep could be significant. By running these numbers, fleet owners may be able to make a solid economic argument for modernization.

Inspecting the used vehicle market
While the case for buying new trucks is solidifying, it's also worth looking at the other side of truck purchases - used Class 8 vehicle sales. FreightWaves recently reported on May's data and found monthly used truck sales fell 22% between 2018 and 2019. Comparing the first five months of the year, 2018 was 17% stronger than 2019.

What can account for such weakness in the used truck market? ACT Research's Steve Tam told FreightWaves that weakness in pre-owned vehicle sales is frequently a reflection of the state of independent trucking. When there is little demand for the services provided by small and medium haulers, those companies don't feel empowered to buy vehicles. In contrast to the large fleets that reap savings from updating to the current model year, these small businesses buy trucks between six and seven years old - the ones the larger companies are replacing.

The market for trucks is constantly in flux, and companies at various levels of the industry will find different motives to upgrade or stand firm. While these signals don't say everything about the state of trucking, industry watchers should keep them in mind.

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