At the start of 2010, the outlook looked bleak and the economic prospects for the used trailer market were just as grim as for the rest of the economy. While 2010 has been a hard year for many businesses and workers, there have been some bright spots.
Used trailer sales enjoyed some of the lowest prices on record as surplus units found their way to a market where there were few buyers. The market was generally illiquid as equipment owners held onto to equipment to defer additional capital purchases. In turn, this placed a brake on new trailer prices which has filtered down into the broader market.
The trailer market is typified by a five year lifecycle and replacement strategy by national carriers who buy in new equipment every 5 years – smaller, regional carriers are the main purchasers of these nearly new units, though there are significant numbers of other purchasers too, depending on the trailer specialization. Regional carriers typically hold the units for 5 years before onward sale to local distribution operators, the typically small operation customer with many trailers finding themselves living out their lives as storage units after 20 years.
That was the bad news: depressed new and used trailer purchases, increasing price competition for operators, reducing return on investment and hitting profitability.
Now for the good news as we welcome in 2011
The economy is getting better and there are definite signs of improvement. Manufacturers and distributors are finally investing in higher stock and capital equipment levels. The Thanksgiving to Christmas holiday retail sales numbers are now around pre-recession levels of 2008, having rebounded with the year-on-year numbers and demonstrate between 10% and 15% growth levels. This means consumers are once again spending money much more freely than a year ago at the peak of the crisis, and retailers and manufacturers are once again gearing up to cater to demand.
All this means more work for the trucking industry, but there is also a relatively unique window of opportunity for equipment purchasers. Used trailer prices are depressed and effectively it is a buyer’s market. On the other hand, demand for trucking services is now increasing and this means a much higher return on investment for the buyer and in turn, enhanced profitability.
The bottom line: now is the time to make capital asset purchases to maximize financial performance in 2011. Used trailer prices are still depressed as supply exceeds demand, however used prices will rise as we go into 2011 and demand increases.