‘Soft ground’ in sight for used truck auction prices
Normalcy is returning to used truck auction prices, but the new normal for a 400,000-550,000 mile rig will cost buyers about 20% more than before the COVID-19 pandemic.
That’s the forecast from JD Power Valuation Services, which tracks used truck prices at auctions and at dealerships.
“We expect auction prices to reach a ‘soft bottom’ before the end of the year, reaching around 20% above the last pre-pandemic peak of early 2019,” said Chris Visser, who writes Power Monthly. Commercial Truck Guidelines newsletter.
Lower auction prices
Even though auction prices have fallen in recent months, they are still 45% higher than before the pandemic.
In August, 3- to 6-year-old trucks sold 8% less than in July but 3.2% more than in August 2021. Late-model trucks sold for 61% more over the past eight first months of 2022 compared to the same period in 2021 despite sleeper trucks depreciating by 6.1% per month on average.
Higher base prices and availability of used Class 8 tractors and sleeper cabs are tied to intermittent slowdowns in new truck production due to supply shortages.
Manufacturers are controlling the backlog of new trucks, filling orders at rates well below demand.
“I didn’t have any unsold [new] stock unit on my lot since January 2021,” said Steve Bassett, president of General Truck Sales in Muncie, Indiana. “I don’t expect that to change in the next two years.”
This lack of new equipment is forcing fleets to keep their trucks longer, which has a direct impact on the number of used rigs available at auctions and at dealerships.
Smaller detail movements
At retail, 3- to 5-year-old trucks sold on average 2.1% less in August than in July. Trucks of similar age sold for 68.6% more money from January to August compared to the same eight months in 2021.
Depreciation is averaging 1.5% per month in 2022, significantly better than auction prices, Power said. Retail prices for late-model trucks are more than 50% higher than the last pre-pandemic peak.
Yo-yo effect of new truck production
Retail sales of used trucks jumped 29% in August, more than expected, according to ACT Research. However, this increase is difficult to qualify as a trend. Production of new trucks increased in June, allowing fleets to shed older rigs that hit used dealerships in August.
But production of new equipment slowed in July, suggesting September used truck sales will also fall. It rebounded in August, hinting at better availability and sales in October. The typical impact on used trucks occurs about two months after new trucks are produced.
“For what it’s worth, this baseline pattern also tracks historical seasonality, although this year is likely to see higher highs and lows given ongoing constraints.” said Steve Tam, vice president of ACT Research.
In addition to month-to-month and year-to-year comparisons of used truck prices, Power is increasingly comparing pre-pandemic numbers to the most recent month. Prices for new trucks have risen dramatically during the pandemic due to production shortfalls and the cost of expedited delivery of critical parts and components.
Relative stability in contract freight prices suggests continued strong demand for new trucks.
“This situation means that buyers will continue to pay a premium for trucks under 400,000 miles because this segment is the next best thing to a new truck,” Visser said.
Used truck prices fall in July, except for low-mileage models
Retail prices for June used trucks drop alongside auction values
Used truck auction prices plunge as freight market cools.
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