Share
May 29, 2019 5:30 PM, EDT

April Used Class 8 Prices Climb; Dealers Wary of Slowdown

Used truck lot John Sommers II for Transport Topics

The average used Class 8 brought a sharply higher sales price in April, even as inventories appear to be building, ACT Research reported.

The average price was $48,532, up 15% compared with $42,100 a year earlier. The average price of a used Class 8 cracked the $50,000 ceiling in late 2014, which was the peak.

“Near. Not a chart topper, but flirting. Certainly in the neighborhood,” ACT Vice President Steve Tam said of the April price.

Sales dipped to 21,500. A year ago, they were 23,000.

Steve Tam of ACT Research

Tam

“Retail sales to the end user are really holding up very well,” Tam said. “Maybe not as good as it has been up to this point but certainly not bad.”

He suggested the strong pricing, despite a slowdown in sales, “backstops” the observation that retail customers certainly are still in the marketplace.

ACT surveys dealers, wholesalers and auctioneers as well as a few large fleets to determine average prices, age and mileage, and volumes.

As for inventories, “we are hearing that inventories are starting to tick back up,” he said.

At the same time, there is a realization among the dealer community of the impending slowdown in freight and freight rates, Tam said.

“They are getting to the point of being cautious about trades they are willing to accept or inventory they are willing to put on their lots in anticipation of the market slowing.” Tam said. “So the dealer-to-dealer [sales] portion appears to be slowing. There is almost an instance of wanting that truck pre-sold to a particular customer before they are willing to take it.”

In related news, the Institute for Supply Management reported continued expanding business strength, but at the softest levels since the fourth quarter of 2016. The April Purchasing Managers' Index registered 52.8%, a decrease of 2.5 percentage points from the March reading of 55.3%

“Any number above 50 still signals expansion, but things have certainly cooled off since the nonmanufacturing ISM hit a 13-year high of 60.8% back in September,” Tim Quinlan and Sarah House, senior economists with Wells Fargo Securities, wrote online.

“Taken together with the report that the manufacturing ISM slipped to more than a two-year low of 52.8%, survey data indicate a slowing that is curiously out of step with the solid jobs report and firmer consumer spending reported earlier,” they wrote.

Another analyst was surprised by April’s Class 8 auction results.

“Just when we thought we had a handle on the market, April comes along and throws us a loop. Volume of trucks sold was down notably from March, while pricing was up by an equally notable amount,” Chris Visser, senior analyst for commercial vehicles at J.D. Power, wrote in a recent blog.

Meanwhile, two large commercial vehicle leasing companies are offering big discounts online to move retail inventory.

Penske Truck Leasing is offering savings up to $5,000 on select used day cab and sleeper tractors. That offer ends July 1.

Ryder System Inc. is offering up to $15,000 off what it referred to as “the largest and most reliable commercial used-truck inventory in the North America.” The sale ends June 30.

Robert Sanchez

Sanchez

In a first-quarter earnings call, Ryder Chairman and CEO Robert Sanchez said the company is expanding its retail capabilities.

“So we’re able to retail more trucks as opposed to wholesaling, which is a 30% price differential typically between a retail and a wholesale. So our strategy is to continue to expand our capacity,” he said.

Ryder is using inside sales more, too, for reaching likely retail customers.

“Inside sales is now 20% of our retail volume, where we have leads being generated online and going to telemarketers who are selling vehicles and getting nice proceeds per unit,” Dennis Cooke, president of Ryder’s global fleet management solutions unit, said during the call.

Ryder System is the parent company of Ryder Supply Chain Solutions, which ranks No. 12 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

The age of the average used Class 8 in April was 6 years, 11 months. A year earlier it was 6 years, 10 months.

Mileage dipped to 444,000 compared with 446,000 a year earlier.

Tam said he and others will be watching the results of the Taylor & Martin Inc. auction of New England Motor Freight’s fleet of 1,550 tractors. Regional less-than-truckload carrier NEMF and 10 related entities declared bankruptcy in February. The trucks will be sold at 12 locations in May, June and July.

“People are going to be watching very closely to see how that equipment fares at auction and what’s going on,” he said. “I can’t remember the last time we had a fleet failure of any consequence.”