Used values soar as van and truck shortages continue

A lack of key components such as semiconductors has led to a cut in commercial vehicle production. The shortfall, plus a boom in demand triggered by the home delivery explosion, means waiting lists for deliveries of some new vehicles are stretching into next year.

“Order a Eurocargo 18-tonner and we should be able to get it to you this year,” says Iveco UK business line director, truck Gareth Lumsdaine.

“If you want an S-Way tractor unit, however, then you may have to wait until the first quarter of 2022,” he adds.

Renault Trucks is citing 2022 delivery dates for certain models. So is Ford, which says that its bank of unfulfilled orders is bigger than it has ever been.

“Some truck manufacturers are now quoting quarter three or quarter four of next year for deliveries,” says Asset Alliance Group sales director James Jenkins. “I’ve worked in this industry for 25 years and have never seen anything like it.”

In response, fleets are asking for leases to be extended until replacements for their existing vehicles arrive.

As a consequence, the latter are not being released onto the used market. The resulting shortage means that used values are soaring.

Regional asset manager, UK, Ireland and export at Paccar Financial Europe Paul Young says: “Half of our leases are being extended at the request of customers.”

Paccar is Daf’s parent company, and the extensions tend to be for at least 12 months.

The upshot, he says, is that prices of used fleet-specification tractor units have gone up by between 10% and 15% while high-specification models have risen by closer to 20%.

“Demand is outstripping supply, and we’re now getting to the stage where year-old tractor units are selling for the same price they were sold at when they were new,” he adds.

“As for used rigids, nobody dares give a price on one,” he adds. “They’re petrified they’ll end up under-selling it.”

Shoreham Vehicle Auctions is seeing one-year-old Ford Transits fetch prices not far short of the cost of new ones.

To underline the rate at which used prices have rocketed, in 2019, Shoreham sold a 67-plate Renault Trafic with 30,000 miles on the clock for £9,000.

It resold the same vehicle this year, now with 53,000 miles recorded, for £11,600; an uplift of more than 28%, despite the fact that it was older and had a higher mileage.

Extending leases

Earlier this year Aston Barclay saw a major rental company due to dispose of 500 vans release less than 10% of that figure.

“Some fleets that were on a 24-month replacement cycle are replacing at 36 months instead,” says Aston Barclay national light commercial vehicle manager Geoff Flood.

“On average, the vans we auction are four years old and have done 75,000 to 80,000 miles.

“Twenty-four months ago they were typically fetching £7,000 to £7,200. Today it’s closer to £9,200 to £9,500, and the percentage sold is running at from 85% to 92% compared with 72% to 76% two years ago.”

The used  vehicle shortage is occurring at a time when demand is increasing sharply, due largely to the growing home delivery, courier and final-mile sectors.

Buyers who cannot obtain new models are opting to acquire used instead, a trend which is accelerating the price surge.

“With a lack of new product, franchised dealers are purchasing used vans to sell in record numbers, at a time when the number being wholesaled is down by 25% compared with pre-pandemic levels,” says Cox Auto-motive customer strategy and insight director, commercial vehicles James Davis*.

“Retailers are having to fight to secure stock as wholesale values rise month-on-month. Euro6 van values are up 22% year-on-year, and up 45% compared with 2019 levels.”

At least some of the demand for Euro6 models is driven by firms needing to comply with tougher emissions restrictions being imposed by certain city councils; a trend which is affecting values of Euro5 and older vans.

“They’ve hit a price ceiling, but they are still significantly up compared with pre-pandemic levels,” adds Davis.

But how soon will it be before the rise in used values begins to plateau, then decline?

“We believe that strong demand and pricing will be maintained into the first half of 2022, at which point it will gradually correct to pre-pandemic levels,” says Dawsongroup Truck and Trailer head of remarketing James Hunter.

Variety of channels

Auctions are by no means the only disposal route used by lessors, who employ a variety of channels to realise the best price.

Fraikin disposes of its time-served 3.5-tonners and trucks to traders, to export markets such as Poland, Malta and Cyprus, and from its own outlet at Garretts Green in Birmingham.

“We sell a lot through our website, and through Auto Trader too,” says Fraikin strategic customer development director Colin Melvin.

The trucks that Paccar Financial gets back are usually offered to Daf dealers first so they can retail them.

When vans and trucks that have been subject to lease extensions eventually arrive on a more-stable market, vendors may find their age and mileage do not meet the requirements of prospective purchasers.

“The trouble is that hauliers buying used trucks all want one that has done no more than 300,000km (186,410 miles),” says Young. “That’s the case even though their own vehicles may do at least 160,000km (100,000 miles) a year.”

If there is any risk that a truck subject to a lease extension will end up being too old to appeal to buyers when disposal time rolls round, then Fraikin is taking it back by agreement, disposing of it and substituting a newer truck from its rental fleet instead.

The current scarcity of new vehicles coincides with a remarketing trend that has accelerated in the wake of restrictions on personal interaction imposed by the pandemic; a shift away from physical auctions to online bidding.

“Before the pandemic our van sales were 70% physical/30% online,” says Flood. “During the pandemic it was 100% online, and now the split is 60% online/40% physical.”

Despite its growth, many industry figures doubt that online auctioning will completely replace physical auctions of vans and trucks.

Hunter says: “With the relaxation of restrictions there is a definite move in favour of re-establishing direct face-to-face contact between buyers and sellers.”

Flood believes the social aspect of such sales should not be under-estimated, adding physical auctions can, in, fact result in better prices for vendors. “We’re typically getting £200 more for like-for-like vans in physical sales,” he says.

Driving up values

Other industry executives argue that it is online selling that drives up values because it allows auctions to appeal to a wider audience.

“With used vehicles in short supply, buyers can log on to several auctions a day rather than drive to just one,” says Davis.

“We’ve seen online buyer audiences double and sometimes triple at sales because they’re getting access to more stock.”

Some buyers are combining the physical and the virtual. They visit the auction prior to the sale, inspect the vehicles, then bid online rather than wait around in the auction hall.

Jenkins says used truck dealers themselves are increasingly selling online, providing detailed images of the vehicles they have in stock along with the specifications rather than expecting prospective purchasers to visit their site.

They can arrange delivery to locations all over the UK, with the customer able to reject the truck when it arrives if it is not as described.

The ease of being able to sell online may tempt some operators to remarket vehicles to retail buyers directly, cutting out the middle-man.

There are fleets that already have their own, well-established, sales operations. For example, light commercial rental giant Northgate has 16 used van outlets under the Van Monster banner.

Establishing an outlet from scratch remains a challenging undertaking however, warns Flood.

“What do you do if the customer comes back a few weeks later complaining that the van he has bought has an oil leak or the steering is creaking? Do you have the staff who can handle it?” he says.

Disposing of diesels

Looking ahead, perhaps the biggest challenge remarketers will face over the next decade is disposing of diesel vehicles in a market that is going electric.

Davis is convinced there will be a strong market for used diesel vans and trucks for many years to come, regardless of tougher local
emissions regulations.

Second-hand battery-powered versions of both will remain comparatively scarce, he suggests, with fleets deciding to keep them in service for longer, given the high front-end acquisition price; and conservative used buyers may be hesitant about acquiring them, anyway.

“They’ve always had diesels. That’s what they’re used to and they’re still going to want them”

James Davis, Cox Automotive

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*James Davis

Cox Automotive customer strategy and insight director James Davis sadly passed away shortly after this feature was written. Davis was a well-known and highly respected figure in the commercial vehicle sector and his knowledge is clearly displayed in this feature. Our thoughts are with his family, colleagues and friends.