Dealers stock trucks ahead of coming emissions standards

Dealers are considering moving up new-truck purchases to get ahead of the higher prices many predict will come in 2027 along with tighter regulations on higher-emission vehicles.  

Both the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) have targets to reduce emissions of over-the-road vehicles manufactured in 2027 and beyond.  

CARB’s emission standards for 2027 will create a “perfect storm,” Hadley Benton, sales executive at Fort Lauderdale, Fla.-based fleet management firm Fleet Advantage, told Equipment Finance News.  

“In 2027, there will be new regulations that will increase the cost of a truck [by] $25,000 to $30,000,” he said. “What we’re expecting is a larger ‘pre-buy’ to prepare for that year.”  

Dealers use the term “pre-buy” to refer to a preemptive purchasing cycle, when they are looking to acquire compliant trucks at lower prices to save money before regulations take effect.  

Dealers and OEMs urge pre-buy 

New Braunfels, Texas-based dealer Rush Enterprises is also urging its customers to buy in the second half of 2024, Chief Executive W.M. “Rusty” Rush said on the company’s Feb. 14 earnings call.  

“With EPA regulations coming Jan. 1, 2027, there will be, as we get to the back half of this year, folks [who] are going to wake up and realize they are probably going to pre-buy the [2025 and 2026 models], given not just the new technology, but what engines are going to cost and go up by January 2027,” Rush said.  

OEMs have also indicated that supply will not meet demand in 2024, further encouraging dealers to move up their purchases, Fleet Advantage’s Benton said. 

“The industry has already indicated that because of the need in 2026, they probably won’t be able to meet that need from a manufacturing standpoint,” Benton said. “So that means the pre-buy actually will start being pulled into 2025.”  

Commercial trucks in the used market that comply with the new emissions standards are already appreciating in value, Jim Ryan, equipment finance and lease manager at Sandhills Global, told EFN.  

“A lot of these pre-buys of engine-powered units are $5,000 to $10,000 higher than they were, even last year, so that’s another thing that dealers have brought up,” he said.  

“Something has got to give,” Ryan said. “These new prices [are] continuing to rise and used prices now are pretty much sideways. These dealers can’t offer anything on trade on these used pieces because there’s no value there.”  

Changing regulations  

The 2027 rules will mark the first federal change to clean air standards for heavy-duty trucks in more than two decades and will be “more than 80% stronger than current standards,” according to a 2022 EPA release.  

As part of the Clean Trucks Plan announced in 2021, the EPA wants to cut emissions from smog and soot produced by light-, medium- and heavy-duty vehicles. The regulations will require at least a 56% reduction in projected average fleet emissions from trucks, beginning with the 2027 model year.  

Transportation contributes to at least 50% of greenhouse gas emissions in California, where trucking companies also face stricter standards, according to the California Energy Commission.  

Companies with 50 or more vehicles or more than $50 million in gross annual revenue will have to report more information about their operations to the state, and manufacturers will have to sell more zero-emission vehicles beginning this year, according to CARB.  

But demand for anything other than diesel is not strong, Sandhills’ Ryan said.  

Used-truck values will likely be driven up in coming years because many drivers will “want to stay with an engine-powered unit,” Ryan said. “We haven’t seen a lot of anything EV-wise really hit the market.”  

Grumbling in the industry 

Some dealers are pessimistic about buying electric, citing concerns about a lack of nationwide charging infrastructure and reliability.  

“The manufacturing of those [electric] trucks isn’t quite there yet,” said Sean Walsh, vice president of finance at Maryland-based Peterbilt retailer The Pete Store.  

There could be a use case for electrifying vehicles over shorter distances, Walsh said.  

“If you think about the trucking industry, if you’ve got day cabs pulling chassis [and] there’s a designated distance there, you’ll see more electric vehicles,” he said, adding that some nationwide transportation fleets like UPS and FedEx are already embracing EVs for smaller distances.  

Meanwhile, some truckers just avoid California and its stringent standards altogether. Walsh said he’s seen customers who “don’t even want to drive into California because of the compliance.”  

Other operators might get out of the game altogether if they can’t afford to pre-buy, Jason Spates, chief executive of Dana Point, Calif.-based Truck Lenders USA, told EFN.  

Spates said he’s heard some “colorful four-letter words to explain [truckers’] disdain for government interfering with their ability to even pay their bills as it is with using diesel right now.”  

Higher emissions standards are “just so unpractical for your normal operator. … If you just have one to five units, it’s just not practical financially,” Spates said.  

Because of this, rising insurance costs, driver payroll and taxes in California, Spates said “a lot of the guys that we worked with in the first 10 years of our existence just decided to throw in the towel.”  

Registration is now open for Equipment Finance Connect, the nation’s only dealer-centric equipment lending and leasing event, which will take place May 5-7 in Nashville. Learn about the event and free dealer registration at EquipmentFinanceConnect.com.