Decline in new operators complicates used-coach market

The lack of new carriers entering the motorcoach industry has shifted the market for some used vehicles, but the healthy and growing operators continue to absorb the late-model, gently pre-owned coaches on dealer lots.


“In recent years, we have seen the number of small bus operators and new entrants decrease given new regulatory requirements, making entrance more onerous, as well as a regional consolidation of operators,” said Patrick Scully, vice president of sales and marketing at Motor Coach Industries.

Those factors, Scully said, have resulted in “a decrease in this buying segment for pre-owned coaches.”

Mike Laffan, senior vice president for East Coast sales at ABC Companies in Camden, N.J., said it is no longer an easy process for new entrants to get through the U.S. Department of Transportation application process.

“Insurance also is a factor in stopping people from entering this business,” Laffan said. “It is very expensive.”

As a result, he said, “When I started working in this business in 2000, there would be 20 people per week coming into our office to open a bus company. They had their DOT authority and were ready to go. Today, if we see two a month we are lucky. Walk-in business has dwindled to almost zero.”

Sales of used motorcoaches also have been diminished by carrier consolidations, Laffan said.

“There are a lot of roll-ups of the small carriers who operated 10 or 12 buses. They are being bought by people who are buying new buses. New bus sales are great,” he said.

Dave Millhouser, a veteran of the motorcoach industry and a columnist for Bus & Motorcoach News, said the industry seems to be shrinking, and the people dropping out are the ones who buy used coaches.

“The little guys have historically bought coaches from the big guy,” Millhouser said. “The bus industry’s business model is based on stable used-bus prices. If you look at the manufacturers who are currently successful, one thing they have in common has been their commitment to the resale value of their products.”

If inventories of used coaches rise, a leader in the finance industry said, this trend could affect the important role of trade-in values in determining the financing costs of new motorcoaches.

“Sales of new coaches have been very healthy recently,” he said. “I always have concerns when you start to hear that the used motorcoach inventory is rising. That obviously is going to affect values.

“The manufacturers have this issue in the front of their minds. They need to continually address it.”

That is part of MCI’s commitment to its customers, said Mitch Guralnick, vice president of pre-owned coaches for the manufacturer.

“To help our operators extend their business into new markets, we’ll work with them to find the right vehicle with the right features and options at the right price,” Guralnick said.

For 2017, the major manufacturers reported sales of 2,423 new motorcoaches of 30 feet and longer, up from 2,368 in 2016, according to the American Bus Association Foundation. Those numbers covered vehicles of monocoque, unibody construction as opposed to body-on-frame vehicles.

Sales of used coaches with monocoque chassis fell from 1,169 in 2016 to 1,050 last year, the foundation reported.

Exactly 700 pre-owned coaches were listed for sale during the first week of March on the websites of MCI, Prevost, ABC Companies (Van Hool) and CH Bus Sales (Temsa). REV Group, which became the North American distributer of Setra motorcoaches in January, does not list used inventory on its website.

The coach manufacturer and distributor sites tend not to list asking prices, but CH Bus can put you on the road for as little as $14,900 — the sticker price on a 1998 Prevost H345 with only 922,000 miles on the odometer.

Finding buyers

“Taking in on trade and disposing of pre-owned equipment is a significant and necessary part of the business as we assist customers in transitioning to new models and new technology,” Scully said. “The ratio of trades versus new coach sales per transaction has remained reasonably consistent for the past few years, which contributes to a healthy industry.”

He said the challenge has always been finding buyers for the used equipment.

“That is no different than it has been historically and no different than in other transportation industries,” Scully said. “Fundamentals are unchanged and negotiating with customers on an accurate value of their equipment always has been and will continue to be a critical item.”

While overall sales of used motorcoaches may have dipped last year while new-coach sales rose, “Our inventory has not increased in lockstep with the market and has been relatively stable since 2013, including even our non-MCI-branded units,” said Brent Maitland, MCI’s vice president of marketing and product planning.

MCI listed 337 used motorcoaches in inventory, including 224 MCI coaches, 95 Setras, 11 Prevosts, six Van Hools and one Temsa.

Prosperous carriers continue to mix used equipment into their fleets, said the industry finance executive.

“From what I have seen, there is certainly a market for the late-model used vehicles. That may be for people who are debt-averse. If they can get by with a three- or four-year-old coach and generate just as much revenue, why would they buy a new one for much more money?

“I do a bit of financing of late-model coaches and that market seems to be okay,” he said. “I don’t see a lot of the later-model equipment on the market.”

Finding balance

Guralnick added, “There was a time when buying a pre-owned coach was the sole province of operators new to the business. No more. The right mix of new and late-model coaches helps an operator financially. It’s about finding the right balance.”

Scully said the value of pre-owned equipment has followed consistent trends and today is no different.

“Desirable, well-maintained models hold value whereas obscure, low-volume, discontinued and poorly-maintained models have their residual values erode more deeply,” he said.

Laffan of ABC said there are plenty of buyers for pre-2007 models, too, because they carry simpler engine emissions technology that is less expensive to maintain.

“The pre-2007 equipment seems to move rapidly when we get it. The five- to six-year-old and newer equipment moves pretty rapidly, too. It is the six- to 10-year-old equipment that gives us the most trouble,” he said.

“When you look at our inventory, those ‘07, ‘08 and ‘09 buses are sitting. We have more of those buses on our lots than any other buses.”

Diminished residual values have shifted many of those used coaches to for-sale-by-owner, Laffan said.

“Trade-in values on those buses are not normally what the customer wants because they may not have been fully depreciated on the customer’s books. It is hard for us to give them the values they want when there is no demand, so we are getting more competition from our customers because they are trying to get more money for their used equipment. It is a quandary that we find ourselves in.”

New customers

Manufacturers are seeking new consumers for motorcoaches that no longer may be desirable for cross-country travel or luxury charters. Such coaches can be used by churches and for employee shuttles and contract work.

Refurbishment can keep older motorcoaches on the road or restore their resale value.

“New uses for coaches are limited,” Scully said. “However, repowering, reseating and re-energizing are all ways to increase the marketability of units. These activities are not new — just more enhanced.”

The breath-taking price tags of new motorcoaches and the quirks of residuals on refurbished coaches complicate the market and financing decisions, the finance executive said.

“As these coaches get more expensive, the temptation is to extend the terms that you are going to finance to keep the payments in line,” he said.

As months are added to the loans, however, the monthly payments on a new motorcoach can drop near the range of payments on used equipment. “That is always a bit of a concern I have.”

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