The sharp decline in used truck prices returned in August
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August marked a return to relatively sharp declines in prices for used Class 8 trucks, according to Chris Visser, senior analyst and product manager at JD Power, although some details have not yet been fully realized.
This came after the second quarter of 2023 saw some leveling off in the decline in the value of the used truck market after the pandemic, Visser, engineer of commercial vehicle valuation and market intelligence operations at JD Power, said at the 2023 FTR Transportation Conference.
“The market took a breath” in the second quarter, Visser said, adding that analysts are still trying to fully understand why.
“It’s possible that values had dropped enough that supply and demand were in balance to the point where buyers saw enough value in that low price…and they kind of came back and bought some trucks,” Visser said.
The August return to sharp currency depreciation, meanwhile, may have been due to a second wave of post-pandemic exits that hit the auction market, possibly due to the fallout from the financial year, he said.
More generally, the factors currently dominating the used truck market include stable spot prices, higher negative equity volumes, increasing interest rates, increased supply, and a new truck backlog returning to normal, Visser said.
Prices are 5% to 10% higher than they were during the last strong market before the pandemic in 2018, Visser told the conference. However, as currency depreciation accelerates in August, the market is narrowing the spread to the level seen in a weak 2019. market.
Prices for trucks that are 4 to 6 years old have fallen by 5.1% year to date, Visser said. Retail prices have fallen 3.7% so far in 2023, but are currently 11% higher than their pre-pandemic peak.
He said that auction prices rose by 160% between 2019 and 2022. Retail prices rose by 80% to 90% between 2019 and 2022. He added: “All the madness was on the auction side.”
“Retail prices are typically more stable than auction and wholesale prices,” he said, adding: “Retail prices generally do not correct as quickly or as significantly as auction prices.”
The retail and auction markets are now trying to figure out where they want to be, he said.
Ritchie Bros. Visser said international auction volumes have been on the rise since 2019. (Ritchie Bros. Auction)
“I don’t need me to tell you that the last two years have been the most ridiculous we’ve ever seen. Anybody who works in this industry, it doesn’t matter how old they are, you can’t come up with enough words to describe what’s happened to the (used truck) market.
Trucks with fewer than 350,000 miles on the clock are the hottest commodity on the market right now, he said.
Visser said there is a dual market at present. He said vehicles with more than 400,000 miles had seen the greatest decline in value and there was a significant surplus in supply.
This is because excavators have been doing multiple truckloads during the pandemic.
Small carriers are putting 200,000 miles a year on their trucks, resulting in 3- or 4-year-old rigs coming to market with as many as 800,000 miles on the clock, Visser said.
Visser, who began analyzing the used truck market in the late 1990s, said he had never seen trucks driving that many miles at this age before.
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He said auction volumes have been rising since 2019, partly due to owners and operators entering and then exiting the market. He said there were at least two waves of these trucks that entered the market.
The value of used trucks began to rise in mid-2020 as new entrants chased higher spot prices, Visser said. He said the market peaked around December 2021 to January 2022. There was an equally sharp decline on the way down.
In 2022, depreciation was up to 8% on the newer Class 8 sleeper cab model. Depreciation typically ranges between 2% and 3% per year, depending on whether the market is relatively strong or weak, he said.
Then, even before Yellow Corp. went out of business, two major fleet players nationwide were unloading large numbers of 4- to 6-year-old taxis, Visser said.
Most of Yellow’s fleet are single-axle day cabs, where there is currently a much better relationship between supply and demand, he said.
Visser said the trucks purchased by Yellow for $400 million provided by the Treasury Department would likely generate a revenue of $100,000 per unit. Although there are about 2,000 of them, demand should be strong, he added.
Older trucks make up a large percentage of Yellow’s fleet and will only fetch a $20,000 price tag, Visser said, although there may be some crossover between demand for single-axle and tandem cabs.
Yellow’s auction of more than 12,000 tractors will be unprecedented in size, but the used truck market can handle it, observers told Transport Topics at the end of August.
A liquidation of this kind has not occurred in decades, said Stacy Tracy, president of Taylor & Martin Auctions, adding that it was by far the largest sale by value in the history of the trucking industry.
Yellow is ranked No. 13 on Moving Topics’ Top 100 list of the largest for-hire moving companies in North America.
(Tags for translation)Used trucks