Used trucks, which a year ago approached unprecedented auction and retail prices, have crashed to the ground. Soft spot market prices, virtually unrestricted new truck production, and drivers relinquishing their authority are all factors.
Some fleets and traders saw a reversal coming. After months of carefully controlling the quantity of new truck orders, manufacturers have opened order books for new bookings. Carriers that operate their trucks beyond the typical three- to four-year trade cycle can plan alternative purchases.
Paccar, the parent company of Peterbilt, Kenworth and European DAF Trucks, expects to deliver between 51,000 and 54,000 new units in the quarter that ends June 30. Some supply constraints remain but conditions are expected to “generally improve” as the year progresses, Paccar’s CEO said. Preston Fite said on an April 25 earnings call.
The availability of trucks means that more used trucks are being unloaded. This pushes prices down.
“There has been a significant decline in the value of meat in the market since the second quarter of 2022,” Chris Visser, director of specialty vehicles at JD Power Valuation Services, told FreightWaves.
“Dealers have adapted to the depreciation in the sense that the smarter ones among them saw the market turn happening and did their best to get out of their high-value stocks before it turned upside down,” he said. “Bids on inbound deals have also become more conservative.”
Building more new trucks means paying more used trucks for resale
The rate of construction and the backlog of new trucks awaiting production are messing with used truck prices.
“Weak freight volumes and rates coupled with new-vehicle sales pumping up supply in the used market are clearly not the combination of factors needed to support used-vehicle prices,” Kenny Faith, president and chief analyst at ACT Research, told FreightWaves.
Power’s latest data for Class 8 used trucks showed April-March auction prices fell between 2.1% and 11% for its standard 3- to 7-year-old truck.
Only 2021 models bucked the trend, rising 17.2%, or $15,000, in April compared to March. But Visser is quick to point out that the small quantities of trucks available can skew comparisons.
Late-model trucks sold 8% less in April than in March and 48.5% less than in April 2022. In the first four months of 2023, late-model trucks brought in 47% fewer packages than a year earlier. The monthly consumption rate in 2023 is currently 5.8%.
Since March, Visser said, Bauer has seen a spike in the number of trucks going to the used market “that are relatively easily identifiable as belonging to at least one large fleet. These trucks are certainly one factor in the decline in prices.”
Prices for used trucks are slightly better at retail than at auctions
In retail, prices for 3- to 5-year-old trucks in April were slightly lower than in March but 35.2% lower than in April of last year. In the first four months of 2023, prices fell by 28%. The exception is dormant late models, which accounted for about 19% more than in 2018, the last strong year before the pandemic. Day taxis hold their own.
Retail prices for Class 8 Prime used trucks fell 22% in April compared to March, according to ACT Research.
So, in most cases, this is a good time to buy a used truck — unless you’ve already turned over your DOT authority because spot freight rates are about $2 per mile lower than they were a year ago, or you can’t qualify for financing in Tight credit market.
The decline is likely to continue for an uncertain period of time.
“The only timing that is done is trying to predict when the devaluation might start to come down,” Visser said. “Availability of new trucks has not been an issue for at least two quarters, and the number of trucks on the road has been greater than demand in the freight market for more than a year. Consumption of more than 6% per month represents an oversupply in the market.
The typical used truck depreciation rate is about 2% per month.
Related articles:
Why did the used truck pricing bubble finally burst?
The ‘once-in-a-lifetime price boom’ in used trucks is reversing course
Low prices for used trucks push the largest dealer network to the margins
Click for more FreightWaves articles by Alan Adler.
