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Should You Turn To An Auction To Sell Or Procure Your Trucking Equipment?

With record new truck orders filling build slots well into 2019, many motor carriers are openly wondering how they will be able to increase truck count while taking advantage of strong freight rates currently dominating the market. With the truck backlog forcing some fleets to hold on to trucks longer than they normally would, many fleets are turning to the auction market to fulfill a growing need without breaking the bank or waiting too long on a huge backlog list.

While owner-operators typically dominated the auction market, motor carriers large and small are now turning to the auction market with unabashed enthusiasm. Still, owner-operators make up 70 percent of the overall auction market. With later model equipment becoming available and an increasing number of fleets entering the auction segment, the auction market is currently anybody’s game.

The ability to quickly put trucks on the highway represents the number one draw for owner-operators or fleets looking to make acquisitions at an auction. Yet, that is not the only big draw for those looking to an auto auction for their fulfillment needs. In some cases, the geographical area may be a big deciding factor. In other cases, the auction channel offers great flexibility in purchasing specific pieces of equipment. You can also survey the equipment in a far more in-depth manner than ever before, thanks to a combination of online and in-person outlet sales.

Many auctioneers offer auctions with a high frequency, allowing potential buyers and sellers to participate daily. This makes for a greater volume and a higher level of flexibility when it comes to finding the piece of equipment you are looking for at a lower price than you would pay at the dealership.

If you are talking about comparing buying equipment at an auction as opposed to buying from a dealer, it is no secret that the dealer is going to charge retail price, whereas at an auction, you will have the opportunity to purchase something for less money than possible at the retail level. Unfortunately, 2018 was not the year to find cheap vehicles, no matter where you looked.

The reason for this can be found in the tight market. There was essentially no depreciation for four-to-six-year-old commercial motor vehicles in the auction market in 2018. While that is an unusual situation, it speaks to the red-hot nature of the truck-buying market in 2018. For fleets not inclined to dispose of units, the 2018 pricing regime represented an attractive proposition.

Why Turn to an Auction?

Auctions are essential because comparable equipment can be found on the retail and auction market, but for vastly different price points. While 2018 has been an outlier in this regard, simply because of the nature of the market, auctions are generally the go-to for fleets looking to save some money on equipment that is virtually indiscernible from that found on a dealer’s lot.

Volume buyers also find auctions to be particularly useful. Fleets who buy in volume often do their own reconditioning, so being able to purchase a large volume of vehicles while completing their own inexpensive repair work saves motor carriers quite a bit of money. The challenge today is finding late-model, lower mileage equipment.

The fact is this: Equipment on the used truck side is in high demand and is hard to come by, which brings a premium to the marketplace. This paradigm has created a shift in the auction market. You can find trucks at auction with a remaining balance of OEM warranty. The strong freight rates, when combined with the current market environment, have brought far more late-model trucks to the used truck market.

Not All Auctions Are Created Equal

It is easy to see why anyone with a late-model truck with any remaining warranty has been actively participating in the auction channel. The auction channel methodology is also very attractive due to the fast-paced environment. Though this can be intimidating to newcomers, seasoned auction-goers know exactly what they are looking for and are ready for the everyone-for-themselves environment found at auction houses.

In some auctions, there are people that basically walk you through the auction and how to make a bid. They outline what to look for and how the auction works. For online auction-goers, resources are available. It is a matter of being confident in what you are doing and trusting the auction to provide the required information.

To get involved in a trucking equipment auction, interested parties need only contact a representative of the auction house and let them know what your particular needs are. Auction houses generally offer equipment lists for upcoming auctions that include photos, spec information, consigned equipment, and contact and follow-up information for company headquarters.

For most auctions, registration is not required to review equipment sales online or for online inspections. For in-person inspections and on-site auction attendance, participants will generally have to register. Registration generally requires a simple process of either a cash deposit or a letter of credit from your bank.

Fleets should also contact the auction house to find out more regarding what kind of reconditioning is performed on the units before they are put up for auction. It is also important to learn what kind of equipment guarantee the auction house offers. While buyers need to do their own due diligence to determine if the equipment meets their needs and what kind of terms they will accept if it doesn’t, auction houses generally provide a high level of checking and maintenance.

Selling Equipment at an Auction

Selling trucks at an auction is generally an interesting proposition. Why? Because it pits the buyer and seller against one another at opposite ends of the deal. One wants to sell for the most dollars while the other wants to buy for the least. When selling a piece of equipment, the seller must be okay with people looking at the piece of equipment whether it be in-person or evaluating specs and photos online.

It is important that anyone at the auction bidding on your vehicle have a reasonable expectation of what they may get out of the vehicle. The seller should have an idea of what they will monetize out of a given asset and the buyer should have an idea of what condition the asset will be in and how long – relatively speaking – it should last, given the application advertised.

Once both parties have come to an agreement regarding the equipment, the next step should be entering into a consignment agreement. Assuming the consigner is agreeable with the terms, the seller would then agree to put the piece of equipment up at the next auction.

One thing a seller must consider is that they will have little more than a best guess price estimate. This best guess will influence whether they want to place a reserve price on the vehicle. If they place a reserve, they run the risk that if the truck doesn’t sell at the reserve price, it does not sell at all. It is important that the seller pay close attention to what they are willing to accept out of the sale.

The other drawback to putting a reserve on a truck is that potential buyers may be put off by the reserve price. If the amount of the truck sale is not disclosed up front, it may prevent auction-goers from bidding on the vehicle.

Auction-goers usually put effort into traveling, inspecting, and then going through the process of registering to buy, so if they feel like someone might have an unrealistic reserve number placed on a sale, they may move on to bidding for another vehicle.

Will a reserve amount, if too high, cause a vehicle to not be sold at all? There is certainly potential of it, which is why sellers must carefully evaluate what they are okay with. In the end, having a piece of equipment that is in high demand will ensure a strong transaction price. Additionally, buyers are in such a great need for equipment that they may be willing to look at something different from what they thought they needed to make it work.

Whether it be looking for alternate powertrain options or even renewable fuel-driven vehicles, buyers and sellers are working in an evolved market. Auctions represent themselves as a great place to unload vehicles or purchase vehicles at a price that cannot be found at the retail level. There is less equipment available because more of it is in use and the demand situation is strong. Are you a trucking company looking to procure equipment at a price that won’t break your bank? Or are you a trucking company looking to offload equipment that is still in great working order to another company that needs that exact type of equipment? In both situations, your best bet may be to evaluate your nearest trucking equipment auction.

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