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Economic Slowdown Increases Demand for Used Apparatus

Issue 8 and Volume 14.

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A Luverne aerial is serviced at the Fire Trucks Plus facility in Rancho Cucamonga, Calif. (Fire Trucks Plus Photo)
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A pump test is performed on a Westates aerial at the Rancho Cucamonga (Calif.) Fire Maintenance Facility. (Fire Trucks Plus Photo)

The used-apparatus business, normally a steady, low-key part of the fire service, has not escaped the nation’s current economic turmoil. It’s profiting from it.

The only slowdown is in the late-model sector, where a scarcity of trucks reflects an increasing demand for quality used apparatus, according to dealers who buy and sell used fire trucks, as well as brokers who arrange purchases. One measure of the market – and the depth of the recession – is that some fire departments are buying used rigs for the first time.

Dealers and brokers report vigorous activity, but caution that sales can be more difficult because of credit availability and the time needed to obtain financing.

Their advice to potential buyers is simple: Determine what you need and make sure you know what you are getting. Require pump and aerial certification before closing a deal and press for full disclosure on the condition of the apparatus, particularly maintenance records.
In southern California, Paul Batista, co-owner of Fire Trucks Plus in Rancho Cucamonga, said there is a “huge demand” – with prices creeping up – for late-model pumpers and aerials.

On the other side of that coin, he said he’s seeing a shortage of late-model used trucks, those less than six to seven years old. At the time he was interviewed, Batista said Fire Trucks Plus had sold six late-model apparatus in the previous couple of months and the company was out of stock.

“We’re just not getting the high quality apparatus being traded to dealers that we used to see,” he said. “Supply is way down and demand is way up.” The problem, Batista explained, is that in the current economy, cities are exercising buyout clauses on their leased apparatus, instead of putting the trucks on the used market or returning them to the manufacturer.

He predicted the shortage of late-model apparatus will get worse before it gets better. Cities aren’t buying as many new trucks, he said, and in some cases they’ll be buying the trucks they’ve been leasing instead of trading them for new models.

Batista also said some medium-sized cities in southern California have been buying used rigs as reserve engines. Recently, he said, a city in California’s Inland Empire region east of Los Angeles, hard hit by the recession, bought a mix of new apparatus and two used American LaFrance pumpers.

Jim Keltner, the owner of Jon’s Mid America Fire Apparatus, a dealer in Rogersville, Mo., said he’s seen a few fire departments buying used apparatus for the first time, especially higher-dollar units.

One example, he said, was a custom pumper he sold recently for $125,000. The engine had 16,000 miles on it and had received 250 man-hours of refurbishment, including corrosion repair and paint. A comparable new unit, he said, would have run more than $400,000.

Contrary to Batista’s experience, he said, “The supply’s pretty good right now.”
At Palmetto Fire Apparatus, Hardeeville, S.C., owner Hank Strickland said his business is not quite what it was two years ago. “We’re holding our own,” he said, and continuing to do fleet maintenance for local cities and counties.
Strickland has seen some purchases cancelled by small municipalities, where tax revenues have dropped, and as a result, he said, “We’re maintaining trucks longer.”

Quincy Jones, owner of Company Two Fire Apparatus, Varnville, S.C., said the price difference between new and used apparatus – in some cases hundreds of thousands of dollars – will drive more departments to buy used rigs if the economy does not turn around soon.

“New fire apparatus buyers have basically put the brakes on,” he said. “The used-apparatus market is about to explode.”

Jones predicted some fire departments that can’t afford new trucks will go to the used market once they realize that the economy won’t be hitting a quick turnaround. He also thinks anticipated price increases in new apparatus caused by tougher emissions standards scheduled to take effect in 2010 will steer more departments to the used market.

“You get more bang for your dollar with a quality used truck,” he said, and a fire department can devote the money it saves to buying other needed equipment.

At Brindlee Mountain Fire Apparatus in Huntsville, Ala., owner and President James Wessel said he has not encountered any shortage of used trucks while watching the demand for them increase since late last year.

“We’re having a lot of first-time buyers in the used market,” he said. One reason, he said, is that some fire chiefs, faced with tough budget decisions weighing equipment against personnel, are opting to buy used rigs instead of new ones.

Engineering The Deal

Finding the money to purchase used apparatus can be a challenge. Dealers and brokers said they have to work harder in this economy to arrange financing.

“It’s not just engineering the truck, it’s engineering the deal,” Batista said. “You become more of a consultant to make a sale.”

Funding has become very complex, he said, with fire departments increasingly working through banks, the Federal Emergency Management Agency, the U.S. Department of Agriculture and state-level financing authorities.

As a result, he said, departments need to know what apparatus are available and what they cost. That sounds simple, but he said he has seen cases where a department gets a grant to buy a truck, but is short of what it needs to close the purchase.

When purchasing a used piece of apparatus, there are decisions about what to buy, how much to pay and how to pay. Then – leaving aside direct sales from one fire department to another – there’s the decision about whether to buy from a dealer or a broker.

A dealer buys a rig up front from a seller, pays for it and owns the truck. Dealers typically put a serious number of hours – and dollars – into refurbishing most or all of the trucks they buy and in many cases offer a warranty. Since they have to buy, overhaul and store their trucks, the range and selection of vehicles they can offer is less than what a broker can offer.

Dealers talk up the importance of the value they add to the process, which often includes pump and aerial certifications in addition to refurbishment and warranties.

At Firetec Apparatus Sales, a used-apparatus broker in Randolph, Vt., co-owner Barbara Baumann compared a broker to a real estate agent, someone who arranges a sale without owning the asset by matching a buyer’s wish list against the broker’s database of available vehicles.

In addition, she said, like a real estate agent, a used-apparatus broker will qualify potential buyers before referring them to the seller. “We’re not just handing out [the seller’s] phone number,” she said.

Dealers And Brokers

When working with a dealer, a fire department selling a truck gets paid up front, but when working through a broker, the department has to wait to get paid until the truck is sold.

Though some dealers tend to look askance at brokers, the line between the two isn’t absolute because many dealers also broker a few trucks on the side. That said, brokers readily report that some of their counterparts aren’t trustworthy.

A common dodge, they say, is to “list” a truck for sale without having any contract, relationship or even contact with the seller. Then, if a prospective buyer turns up, the broker will contact the seller – or try to find out who the seller is – and try to improvise a deal.

If they’re reputable, both dealers and brokers screen what they sell.

Full Disclosure

“We ask for full disclosure” on a truck’s condition, said Baumann, and pass that information along to prospective purchasers. “If it’s really bad, we just don’t list it,” she said. “We do refuse some listings.”

On average, according to Keltner, out of every 10 trucks Jon’s Mid America is offered for purchase, two might be inspected and one bought.

Similarly, Jones, who sells 25 to 30 trucks a year, said his business is offered 30 to 40 trucks a month, but on average finds just five worth buying and actually buys only two or three.

One of the big rules for buying a used fire truck is that you have to know what you need, not just what you want.

Keltner cautioned that buyers can get too hung up on a specific year and model of apparatus and lose sight of exactly what they need the vehicle to do. He offered five important points to consider: a rig’s overall condition, the mileage, the extent of any corrosion, the type of water tank, and the power train.

“All those things,” he stressed, “are more important than the age of the truck.”

Buyers, Jones agreed, “need to lay out exactly what is needed,” without any extraneous bells and whistles. “Everybody wants the new gadgets that are on the market today,” said Strickland, but that isn’t always possible on a used rig. “We can come pretty close [to a buyer’s specs] if they give us time,” he said.

The flip side of knowing what you need is knowing what you’re buying.

A common mistake fire departments make, according to Keltner, is buying a used rig from another department without first inspecting the vehicle and checking it out thoroughly.

For example, he said a department recently bought a pumper for $10,000 in Texas. The truck broke down on the drive to its new home, and the new owner asked Keltner for an estimate to fix it. Based on that estimate and the fact that the pump was no longer made, he said the buyer decided to scrap the truck rather than fix it – a costly lesson.

Do The Homework

Jones said his number-one question is: “Where did the truck come from?” And his number-one rule is: “Do the homework.”

In the used apparatus market, he said, “The unknown is what bites back on most fire departments.”
Jones suggested one useful exercise is for a fire department to estimate the cost per run over the expected lifetime of any used apparatus it’s considering buying. He also recommended that buyers always get third-party certification on pumps and aerial devices.

Wessel said buyers should look for warranties and make sure that any overhaul work is done by certified emergency vehicle technicians. “We hear a lot of horror stories about used vehicles that were bought without a warranty,” he said, especially involving problems related to lack of aerial and pump certification.

Another crucial element that affects the value of fire apparatus is proper maintenance.

Jones said apparatus maintenance is being cut back at many fire departments in response to tight budgets. That’s a serious mistake, he said, since better maintenance will increase the value – and the sale price – of used apparatus.

Fire departments, Jones said, need to keep maintenance going “right up to the day they get rid of the truck.”

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