06:54 PM

Considering Alternatives

It's a matter of simple supply and demand economics— the historically low volume of new trailer sales in the past three years means that fewer late model used trailers will be available going forward. Likewise, the value of those trailers offered for sale to second owners is likely to rise.

Today, the modest but steady growth seen in the Class 8 truck market is extending to trailers as well. Several factors point to sales growth potential, which is also keeping used trailer values high:

• Chief among the drivers of this positive trend is fleet age, which has risen to historically high levels as a result of underinvestment in replacement trailers over the past three years. Currently, the average trailer is eight years old, a number that is slightly higher for dry freight vans. Increasing maintenance costs for this aging fleet will drive demand for new trailers for the next two to three years at least.

• Industry specific drivers will affect demand for certain trailer types. For example, flatbed demand is closely tied to commercial and residential construction activity, which is expected to rebound.

• Regulatory issues will also contribute to increased demand for trailers. For example, the California Air Resources Board (CARB) has mandated features for new and used trailers covering refrigeration units as well as aerodynamics, which should lead to an increase in new orders.

• As truck tonnage grows, trailer utilization is rising, up from a low of 75 percent in early 2009 to nearly 98 percent earlier this year.

Due to higher raw material and energy prices, which raise manufacturing costs, new trailer buyers may also find that prices are rising. Still, despite ongoing concerns about the North American economy, trailer demand has not shown recent signs of decline. Current forecasts point to a strong surge in demand in 2011 and beyond.

Considering used trailer values and new trailer prices, as well as long-term costs and other market and regulatory considerations, there may not be a better time than the present to consider replacing equipment.