Used Truck Sales and Prices Increase in July
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Used Class 8 truck sales and prices increased on a year-over-year basis in July, despite freight market conditions continuing to drag.
reported that sales increased 3.5% to 23,600 units from 22,800 in the prior-year period. That also marked a 4.4% sequential increase from 22,600 units in June. The average retail sale price increased 11.5% year over year to $62,254 from $55,819 and 2.3% sequentially from $60,830. Average mileage decreased 3% to 416,000 from 429,000 a year ago, but increased 3.7% from 401,000 the previous month.
“The used truck market finds itself in an interesting predicament these days,” ACT Research Vice President Steve Tam said. “On the new truck side of the business, the industry has produced and consumed trucks at above replacement rates for seven years running. The net result is excess capacity.”
The coronavirus pandemic was a major contributor to that imbalance, causing a surge in freight demand due to changes in everyday life and purchasing habits. But this eventually caused overcapacity when freight demand slowed again.
[August Used Classes 3-8 Update] - Used Truck Prices Increased in July
Read more from update here: — ACT Research (@actresearch)
“Faced with declining demand, the OEMs have responded by laying off workers and reducing output,” Tam said. “But without a meaningful increase in freight, it will take time to consume the unused capacity. Fewer new trucks rolling off the assembly line means reduced trade activity, somewhat alleviating concerns about excess used truck inventory. This seems to be helping used truck valuations.”
Tam is optimistic the used truck pricing environment has turned the corner. He noted that at least some of the increase in prices for new trucks is carrying over into the secondary market. This comes as used truck demand increases due to traditionally new truck buyers turning to late-model and low-mileage used vehicles as substitutes.
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“July was pretty universally bad,” said Trey Golden, vice president of used truck sales at . “We’ve been talking for a while, that we feel like we’re bouncing along the bottom, and I don’t think that’s any different. But it was definitely down from June, although we’re definitely going to pick back up in August.”
Golden pointed out that the month was unfavorable from the outset with the timing of the Fourth of July holiday being disruptive. The day fell toward the beginning of the month and was on a Friday. This meant the used truck market essentially was behind from the start.
“What I’m seeing is carriers aren’t buying; we know new trucks [sales] are horrible,” Golden said, “and so, there’s really no pressure for them to get rid of anything. They are trying to de-fleet, but they don’t have new trucks coming in, so they’re definitely not dumping.”
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Golden noted that there has been an increase in people trying to trade out trucks bought during the pandemic when the market was extremely tight and pricing was high. The higher prices could be driven by their book value being up, making it so carriers are more likely to keep the truck instead of selling it at a loss.
“The carriers are the ones selling the trucks right now, and they’re going to get their book value or they’re just going to keep it,” Golden said. “Now maybe they would be smart if they did, because, you saw carrier earnings, and some operating ratios were horrible.
“So the longer they keep that stuff, the harder it is for them on the maintenance side. But they will not take a loss on a truck. They will get the book value down until the market matches. Now the reverse of that, which is what was going on for the last year or so, and seems to be not going on, is the banks.”
Golden also pointed out that the freight market downturn has gone on much longer than many in the industry had anticipated, but decreased freight volumes and oversupply of capacity have kept rates low. He noted that this also has resulted in a buyer’s market for those looking to buy a used truck since they have options.
“Everybody’s looking for the uptick, but as far as we can see into the future, it remains flat,” Golden said. “I don’t see the catalyst. Obviously, it’s going to come. It’s a cyclical business, and the further you pull the rubber band and keep taking capacity out, when freight comes, it is going to come back even harder. Which will be great, the industry needs it. But to predict when that turn is, we’ve gone so far past the time that anybody thought that would happen.”
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