FleetWatch Online - 59-Used trucks

There’s a place in the market for all types and sizes of used trucks but buyers are now more discerning in their purchase decisions.

In June last year, we did a survey of the used truck market and came to the conclusion that this sector represented the 'dark side' of the industry. Has this changed for the better over the past year? The answer is a definite yes on certain fronts but 'no' on others. One thing is for sure: while changes in the dynamics of the used truck market have leaned more in favour of this sector, it is not an arena for 'newbies' to enter in the hope of making a quick buck. It is just too complicated and requires a level of management skill that the word 'used' just does not seem to infer writes Patrick O'Leary.

Perhaps it is the word 'used' that has, in the past, pushed this sector down to a level where the perception exists that it is a 'lesser' arena to operate in than the new truck arena. Nothing could be further from the truth.

The health of the used truck segment is vitally important to the health of new truck sales with every new truck salesman clamouring for the best prices on trade-ins so as to enable him to conclude the best deal on his new trucks. No thought or cognisance seems to be given to the constraints and pressures imposed on the used truck manager by the market. The new truck salesman just wants to best price on the used stock being traded in to enable him to conclude the 'new' deal.

Well, those days are gone. The sale of a used truck is not there just to enable the sale of a new truck. The sector now has its own set of dynamics influencing it and the skills requirements of managers operating in this arena are high. 'Ali Baba and the Forty Thieves' is a label long ago dropped from the used truck dealerships.

Mark Croxon, used truck sales manager of Sandown Commercial Vehicles is a man who, for many years, has specialised in this segment and has kept his finger firmly on the pulse of the changes that have impacted on his industry.

Whereas his biggest competition used to come from the price tags hanging on his competitor's used trucks, it now comes from the price of new trucks on the new truck dealer's floor. For a number of years now, the prices of new trucks have leaned heavily in favour of the buyer with many buyers who previously bought used now buying new. This, according to Croxon, has, to some extent, taken the large corporates off the used trucks showroom floors and introduced newcomers to the market.

There’s a lot of skill behind this simple company board in speccing trucks to a buyer’s needs.

"Very few corporates are buying used vehicles because with low prices and low interest rates, it a now easier to buy a new truck than it ever has been. Combine this with discounts received for volume purchases and the new route has become far more attractive for the bigger corporates. What we are seeing is that more smaller entrepreneurs are entering the used market," says Croxon.

But that does not mean that these 'newbies' are easy sells. Far from it. "The used truck buyer has become far more discerning in his purchases than he was in the past. It's not just about price. Added value now comes firmly into the picture," says Croxon.

It is because of this that he is now looking at ways of adding more value such as, for example, finding ways of increasing the warranty period on his used trucks. "You can get a low priced new truck with a 4-year warranty and then buy an additional warranty that will take you up to 800 000 kms. All this gives the buyer great peace of mind and he has to weigh up the value of four years peace of mind against the R220 000 saving he makes on the purchase price?"

All this has put new pressure on the value of used trucks with dealers not being able to pay premium prices for used anymore. "We can't buy at high prices because we won't be able to move that stock," says Croxon.

There are a plephora of used truck dealers operating in the market but it is no longer an arena for quick buck operators. A high level of management skill is needed in order to prosper.

On the point of new truck prices, Croxon says the used market has come under particular pressure from the Indian and Chinese products that have established a foothold here. "Tata has given us a big hiding as you can buy a new Tata for R550 000 against a second hand Actros for the same price. Obviously operators are going for the new. Tata has, in fact, been a phenomenal story in the way it has impacted on our market," he says.

Another marque that has made an impact is the Chinese sourced Powerstar sold under the Super Group banner. "One of our clients recently bought 10 new Powerstar tippers and added two used units from us merely because Powerstar did not have stock. If the stock was there, he would have bought the new units."

And there's more to come with market rumblings telling of a number of Chinese marques that will be entering the market - not via the backdoor but through established and reputable companies like McCarthy which has formally announced that it is bringing in Chinese products next year.

Adding credence to what Croxon says regarding the more discerning buyer is Edan Traders' GM, JP Venables, who confirms that a used truck sale is no longer a quickie.

"You have to know what you are talking about and ensure your client goes away with the right specced vehicle for the job. The used truck salesman needs to know a lot more than the price tag of a truck. He has to be technical, identify the needs and problems of the clients and ensure that his client goes away with the right truck for the job. Get it wrong and you won't get repeat business."

Adding value is also something this company is doing more and more - one such service being the ability to offer clients finance through its own finance company. "We can help the start-up guys where they banks won't even look at them," says JP. "We know the business of transport and obviously there is risk but it is how you manage it that makes the difference."

Standing alongside a new start-up operator from day one in terms of speccing the correct vehicle for the job, financing that vehicle and then helping him along the road has paid huge dividends for this company so much so that a new branch has been opened along the R59 in Meyerton to service its growing client base.

A recent innovation from Edan Traders has been the addition of a trailer hire division. "You get a guy who has enough to buy a truck tractor but not enough for a deposit on a trailer. We give him a gap by hiring him a trailer until he starts making enough money to buy his own trailer. It helps him along the road," says JP, adding that there a lot more to the used truck business today than there was in the past.

Another influencing factor - which has got worse in the past year - is the fact that South Africa cannot export used trucks into the rest of Africa. This is not due to any legislation but rather due to the fact that our products remain uncompetitively priced against European and American trucks.

"The only way to fix this," says Croxon, "is through gradual devaluation of used vehicles to the point where we will eventually be in line with the global market. It's only then that we'll be able to export into Africa."

How's this story about a client who bought a trailer from Croxon? "The interesting thing is that this client, from Zambia, had bought a 1996 Volvo truck tractor from the UK - and had bought it off the internet without inspecting it. He landed it in South Africa at around R125 000 with all duties and shipping paid. The equivalent truck would have cost him in the region of R280 000 in South Africa. That's what we're facing. That's the reality."

Given all this, I asked Croxon if there was one piece of advice he would give to operators to help them maximise their residuals and trade-in values, what would that advice be?

"Maintain your trucks regularly and professionally throughout their lifetime - and this particularly so with new technology vehicles. If these vehicles have been abused, the buyers will walk away from them. If operators don't maintain and service their trucks, they could lose a lot of money when it comes to the trade-in."

Sounds sensible to us.