Home Business Big Trucking sells expensive trucks to small fleets

Big Trucking sells expensive trucks to small fleets


If you’ve ever had a spare 18-wheeled car that you no longer wanted, now is the time to sell. The used 3-year-old truck sold for more than $ 141,000, according to ACT Research, more than twice as much as last year.

Trucks are getting more expensive. (SANAR)

Unfortunately, you probably don’t have any big rifts. This is one of the many things that sets you and me apart from some of the largest public transportation companies in the United States

America’s largest transportation companies have many used tractors and trailers. Some of these companies quietly earned tens of millions of dollars in 2021 and in the first three months of this year, selling old trucks in their fleet.

“Profit from the sale / disposal of property or equipment” is a sleepy, often ignored line of the quarterly or annual financial report of any company. Like my colleague Todd Maiden wrote last yeareven trucking insiders don’t pay much attention to it in routine cycles.

But now trucking companies are using their gains in oversized used equipment sales to offset other barriers to the industry: rising wages, high insurance premiums and, as of this year, a record increase in diesel.

The strategy has always been delayed for companies with lots of trucks, but it intensifies when equipment prices reach record highs – and as many of their own drivers leave Big Trucking to open their own trucking companies.

Hot new side fuss for giant trucking

According to the Federal Carrier Safety Administration, there are about 275,000 trucking companies in the United States, but a whopping 86% of them – small – with six or fewer trucks. A total of 120 companies have 1,000 or more trucks.

Since the pandemic, the number of parks of moms and dads is growing. Since the beginning of 2021, at least 10,000 new transport companies have been created every month. Many were small transport companies; the total number of fleets with six or fewer trucks increased by 12% last year, according to the FMCSA.

New trucks are filling the market. (SANAR)

These truckers grew faster than Big Trucking. The total number of tractors for small trucks with six or fewer trucks increased by 7.7% last year. In large trucking companies with a fleet of 1,000 people and more, they increased the number of tractors by only 1.2%.

Fleets of moms and dads are growing faster than the big boys. (SANAR)

But where on earth could these small trucks place these tractors and trailers? The crunchiness of supply chains and the shortage of spare parts have struck the availability of new trucks.

These new trucking companies mostly bought or rented used trucks. Like my colleague Alan Adler wrote late last year in an article entitled “Record prices for used trucks do not deter buyers who choose rates” (I emphasize my):

Higher prices are not stopping potential buyers from chasing these high spot rates, said FreightWaves’ Steve Tam, vice president of ACT Research.

“There are sources of funding to lend money to buyers, even at the record high prices we see,” he said. «Lenders are certainly asking for higher down payments and higher monthly payments, but at record high freight rates borrowers can pay more while earning better».

Thus, even if the shortage of drivers affects some segments of freight, there is a growing number of drivers who leave hiring firms to strike them out on their own.

“Having no data, I would have to say this the vast majority of used truck sales this year came from owner-operators and small fleets, many of which are new entrants tempted by profit motivesSaid Tam.

Several industry insiders shared with me that major transportation companies have been able to find the bright side of the “labor shortage”. They had too many trucks and too few people, so they sold old trucks to these new upstart companies.

Big Trucking often looks at the little guy as a competitor. In conditions such as 2021, small trucks were able to take advantage absurdly high spot prices. However, large transport companies usually play in the world of contracts. They can’t suddenly tough on their long-term customers with massive exchange rate jumps when the trucking market is hot. And, in turn, their customers do not require preferential tariffs, if freight is not so foamy.

We are currently following these spot rates failure. This raises the question of whether these new trucking companies will be able to withstand their lease payments for these extremely expensive trucks.

Spot rates on dry vans rose last year. Now they are falling apart – and it is unclear how small the trucks will be or decline. (SANAR)

Knight-Swift executives from Phoenix, 3 largest US truckeracknowledged some of this dynamics in a call on April 20 to investors.

“To talk about the used equipment market, those who risked increasing the number of trucks in terms of small carriers, their cost structure is very different from where it was before,” said Adam Miller, CFO and president of Swift. “And so they can afford to lower rates to a certain level before leaving our space, because they buy equipment that is probably three to four times more than they bought in the previous cycle. So this is one thing that needs to be monitored very closely. “

“We don’t supply or allow small price operators to come in and increase capacity,” said David Jackson, CEO and President of Knight. “And the limited number of used trucks we sell, in some cases we sell them for the same amount or about the fact that we paid for them brand new before driving 450,000 or 500,000 miles.”

In the first three months of 2022 alone, Knight-Swift sold nearly $ 35 million worth of used equipment compared to the same period last year.

The real Wolf of Wall Street is a used truck

Profits from the sale of used equipment were a boon that impressed analysts and investors. Earlier this year, Heartland Express, based in Dobuku, Iowa, announced record earnings per share in 2021. In the fourth quarter of that year, Heartland managed to cut its own working factor – a key metric used by Wall Street to assess how well a company balances costs and revenues – by 410 basis points compared to last year.

Hooray, 410 base points!

But many of these basic points did not come from improving efficiency or performance. More precisely, the colossal 300 base points came from Heartland, which sold $ 10 million of second-hand equipment in the fourth quarter. (Read more about Heartland’s earnings here.)

In 2021, Heartland sold equipment for $ 37.4 million, accounting for 35% of its operating profit.

The trucker from Job is hardly one. Last year, Knight-Swift sold a whopping $ 74.8 million in used equipment and property. This is a big increase over previous years.

One of the largest fleets in America is selling more and more used trucks. (Company reports)

Schneider in Green Bay, Wisconsin, received $ 63.9 million from dumping used equipment and property in 2021 compared to losing $ 6.2 million in 2020 from the sale of equipment and property and $ 3.3 million in earnings in 2019.

Elsewhere in the Midwest, in Omaha, Nebraska, Werner said he was sold less tractors and trailers in 2021 than the previous year, but earned $ 61.5 million in 2021 versus $ 11.3 million in 2020. The leap continues: Werner earned twice as much money on second-hand equipment sales in the first quarter of 2022 than the previous year.

It is unlikely that all this is typical only for trucking. Companies often sell off real estate or equipment to smooth out awkward earnings. Against the background of record high truck prices and unprecedented interest in opening its own transport company Big Trucking is in a particularly good place to benefit from tactics.

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