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Where are truck prices in Ireland going?

Date: 06.07.2012

Ireland has been in a unique situation over the last 3 years. Typically we took our prices cues from the UK. We all had a neighbor or friend who would take a trip across the water to buy a used car and then tell us just how much money he saved compared to buying it locally. A couple of years back something began to change over here, the vehicles were cheaper used in Ireland than the UK. This was a major change, worst still the vehicles were cheaper not even taking the exchange rate into account. The commercial vehicle sector was hit worse than the car trade and made operating vehicles a difficult financial certainty. There was many an example of a year old vehicle getting auctioned for about one third of its purchase price. This practice goes against logic and was also unsustainable. 

 

 

Quite often I would be asked to look over a deal, say a lease agreement for 2 years. That is a customer takes a vehicle from us for 24 months, runs a particular amount of mileage and returns the vehicle at the end. The real problem for the lease and rental companies became “How much can I get for this truck at the end of the period?” For the last couple of years, the answer was pretty much “I don’t Know” all previous experience of residuals held for nothing in an irrational market.

 

This resulted in rental companies writing less business. Primarily because of the uncertainty of vehicle residuals but just as importantly was the fact that clients companies were dropping like flies.

 

 

 

Last week I read an article on the lack of good three bed housing in Dublin ( very pertinent, most of what was built between 2003 – 2008 was apartments) and the fact that a bottom had been reached. Now, I am well known to be a uber-skeptic when it comes to the Irish property market but there is a point to all this. Recently I made a tour of all the auction grounds in the Dublin area and also any of the bank yards with repo vehicles. Quite often I find these to be good places to buy stock and quite often there a couple of gems tucked away in a corner somewhere.

Sorry to say that this trip yielded nothing. This in itself would not be too surprising but it’s been a couple of months since I have seen good value modern commercials at auction or indeed in a repossession yard. The majority of the vehicles need work, have no tax on them and no doe cert. All this means that there is a big enough bill just to get on the road legal and ready for sale / work. The other factor I’m noticing is that newer vehicles are few and far between; this boils back to the few vehicles that were sold from 2009 to 2012. That other source of vehicles, the UK, has not yielded the numbers that it did in the past because commercials are more expensive over there. Sure we were exporting them over there!

So don’t take this as a truck guy saying “its fill yer boots time!” , simply that there is not a good supply of category B light trucks and vans on the market at the moment and that the avenues for getting modern vehicles cheaply seems to be gone. And it is not coming back for 2 simple reasons, firstly there were very few trucks sold over the last 3 years and the banks and rental companies financed and leased very few. This means that we are likely to see a just in certain sections. One area that has taken a large just over the last 6 months is the category B truck class. Smaller Isuzu, Mitsubishi and Mercedes trucks have been making much stronger money than in 2011.

As a parting anecdote, I am currently in Dallas, Texas and needed to buy a car. There is no shortage of vehicles over here but also no shortage of consumers. I found myself looking at a 2010 ford Focus and the sales price was $5,000 less than new. I asked the salesman why it was so close to the price of a new one. He mentioned that it was 20% cheaper than a new one and it was a great deal!

My mind went back to Dublin and the 2 year lease deal I mentioned at the start of this post,  our standing residual at the end was 40% and we glad to get it!

 

John Murphy 6/7/2012

 

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