Overdrive Survey Details Small Fleet Truck Buying Preferences
It is not obvious to say that small fleets and owner-operators prefer to buy used trucks rather than new trucks. It’s been conventional wisdom for ages and at the end of last year our sister publication Overdrive confirmed this in a purchase survey of its audience of owner-operators, drivers and small fleets.
In this November 2021 survey, nearly 56% of respondents who had previously acquired equipment said their most recent addition had been a used truck purchase. This number may seem small, but the survey was not binary in its response options. Beyond buying used or new, other acquisition options include buying or building a glider kit, leasing a truck, and leasing a truck, among others. . From Overdrive respondents who had purchased a truck, 64% had chosen used rather than new. Again, this may not surprise you.
What could be more illuminating Overdrive the survey results were not what owner-operators and small fleets buy, but where they buy. And how they finance these purchases.
The used truck market might be the preferred source for owner-operators and small haulers, but once a customer decides it’s time to purchase another used truck, a franchised truck dealership n has little or no advantage in acquiring his business over anyone else. Additionally, many customers are not at all eager to buy, and when their circumstances change and a purchase becomes necessary, franchise truck dealers are often at a disadvantage because of the inventory they carry.
Let’s first look at where customers are looking for equipment. Of the more than 200 used truck buyers who responded to Overdrive survey, only 27% said their last vehicle purchase was from an OEM-affiliated truck dealer. Considering the investments that franchise truck dealers have made in recent years to bolster their used truck departments, this number is alarming.
Independent used truck dealers gained a higher customer share at 33%, but even that number seems small given the number of additional buyers available. The fact that only six out of 10 used truck customers buy from a dealership means that there is a huge segment of customers that dealerships are failing to reach (or convert).
Where is everyone buying? There have been rumors recently in the used truck space that the surge in auction prices has been partly driven by end users seeking bargains at auction to avoid the retail market. That may be true today, but it wasn’t in November; only 3 percent of Overdrive the responders said their truck was from an auction.
Among survey respondents, retail sales account for the most missed purchases by dealers, capturing 30% of the used truck market share.
looking further Overdrive data, it is possible that model year (MY) preferences drive this segment of the market. Fifty-nine percent of respondents to the November survey said their last used truck purchase was 2016 or later, but only 21 percent use a 2016 or newer MY tractor. To some extent, this chasm makes sense, but even extending the truck MY to 2010 only accounts for 43% of respondents. Conversely, 31% of survey respondents use a 2003 or older MY truck, although only 9% said their purchase was in 2003 or earlier. After-treatment and advanced vehicle technology still put off many buyers.
Another interesting nugget in Overdrive investigation was how these purchases were financed. Less than a quarter of survey respondents (22%) whose last purchase was a used truck said they financed the purchase through a specialist finance company, such as those run by OEMs and aligned on their dealerships. Even more surprisingly, 38% of customers said they paid in cash. Bank loans followed closely at 35%.
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Similar to the auction sentiment above, these numbers may not be indicative of current market conditions, but they do show the challenge dealerships face when bringing their financing solutions to the secondary market.
There is a large segment of used truck customers who are not looking for late model used trucks. There is also a large segment of customers who know their payment capabilities before contacting a seller and know exactly how much they need to spend. The overlap between these two segments is substantial, and many of the buyers who belong to both camps probably never even approach a dealership when looking for a truck.
None of this may mean much to a used truck dealership today, with such high overall market demand and inventory turnover rates regularly setting record highs. And the used truck market is not expected to slow down this month or this year.
But at some point in the years to come, market cyclicality will return, and when it does, dealers looking to engage with small fleets and owner-operators to stabilize their sales would be wise to remember what those same customers revealed about their shopping preferences last November. . Not everyone wants a 3-5 year old sleeper; neither can they afford it.