While the environment for the used truck buyer has been more “predictable and stable” of late, according to Arrow Truck Sales – generally up a little bit year-over-year in 2017 – an interesting “sub-trend” many expected would’ve died out by now continues to stay strong: demand for pre-2007 truck models that don’t incorporate exhaust aftertreatment systems.
“One of the things that has been surprising over the last couple of years in the used truck business is the demand for pre-DPF [diesel particulate filter] trucks,” noted Steve Clough, Arrow’s president, in a recent conference call with reporters hosted by Stifel Capital Markets.
“There has been a large number of used truck buyers ... who have been dragging their feet in trying not to buy a truck that has a DPF or selective catalytic reduction (SCR) system,” Clough said. “For that, you’re talking about trucks that go back to the 2007 model year and prior.”
He added that such truck models “are getting hard to find in the marketplace,” so many of those seeking pre-2007 models continue to rebuild the trucks they currently operate.
“They look to get glider kits and those sorts of things, trying to avoid the emissions technology,” Clough emphasized. “But the number of people who are able to buy those pre-DPF trucks is diminishing because they’re just not available.”
He explained most of the buyers desiring pre-2007 trucks are “generally small,” either owner-operators or fleets with just a few trucks.
But what’s been driving this trend is that the cost of repairs has increased significantly on a post-2007 model truck, especially in terms of exhaust emission aftertreatment system repairs.
“If it’s an SCR truck, you could have a $20,000 bill to repair something and not even touch the engine,” Clough pointed out. “Replacing a DPF could be $3,500 to $4,500. A diesel oxidation catalyst (DOC) is in the same range. If you have to replace the SCR [system] it could be anywhere from $4,600 to $11,000, depending on the make [of the truck] and [the system] configuration.”
Those costs are scaring used truck buyers to death, he added.
“They really are problematic for a lot of used truck buyers,” Clough stressed. “When you find used truck buyers getting out of the business, lots of times they’re getting out of the business because they’ve had one of these failures.”
He noted that overhauling a modern engine these days, with the cylinder heads included, could be a $20,000 to $30,000 repair bill.
“People hear stories about some of these catastrophic failures, which are frequently discussions of truck stops, and that does drive some of the behavior of the buyers,” Clough pointed out.