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November 28, 2018 4:45 PM, EST

Average Used Class 8 Costs More in October as Sales Climb

Used Class 8 The SelecTrucks of Louisville dealership in Louisville, Ky. (John Sommers II for Transport Topics)

The average price for a used Class 8 truck in October rose 11% year-over-year to $45,378 as buyers pushed sales 9% higher despite inventory levels that remained tight, ACT Research Co. reported.

A year ago, the average price was $40,861.

Steve Tam

Tam

Sales jumped to 25,100 compared with 23,100 a year earlier, according to ACT, which surveys dealers, wholesalers and auctioneers as well as a few large fleets to determine average prices, age and mileage.

“If you look at the economy or the freight market, things are performing pretty nicely right now,” ACT Vice President Steve Tam told Transport Topics.

But the latest gains arrived as the freight environment approaches its historical peak, he said. Freight cycles typically average 24 to 30 months, and this one has gained momentum since the second quarter of 2017.

“This cycle is getting a little bit long in the tooth. We are softening in the near-term but still up on a year-over-year basis,” Tam said.

The October for-hire truck tonnage index from American Trucking Associations was 9.5% higher than in October a year ago.

Meanwhile, the age of the average Class 8 sold was 6 years, 11 months — down slightly from 7 years a year earlier, Tam said.

Mileage increased to 455,000 compared with 449,000 in the 2017 period.

One publicly traded dealership reported its used truck business remained brisk in the third quarter.

“We’re turning our inventories, we’re making good margins,” Rush Chairman and CEO W.M. “Rusty” Rush said during an earnings call.

Used Class 8

A Rush Truck Centers location in Doraville, Ga. (Rush Enterprises)

Used vehicle revenue jumped 32% year-over-year to $97.5 million as sales increased 26%, said the company, which has 100 locations in 21 states.

Another large used truck seller has been carefully managing inventory levels for more than a year.

Ryder System Inc. has kept inventories of used trucks low, after starting that process in 2017, and expects them to remain near the bottom end of its target range for the balance of this year, said Marc Thibeau, vice president for global used vehicle sales.

“This positions us well going forward and allows the company to sell used vehicles primarily through our retail sales network, where we realize the best pricing,” Thibeau said.

ACT said retail transactions, those in which the buyer will use the truck, climbed 21% year-over-year, while the auction market rose 3%.

October’s auctions point to the continued shortage of late-model trucks, Chris Visser, senior analyst for commercial vehicles at J.D. Power, wrote in a blog.

Chris Visser

Visser

“On average [at auctions], trucks 4 to 6 years of age are bringing 18.1% more money in 2018 compared with 2017. We don’t see much change into early 2019, outside of typical fluctuations due to the holidays and winter weather,” Visser wrote.

The wholesale market, which largely is dealer-to-dealer sales, dropped 21%, Tam said, while noting the sample within a sample generated variability.

“It is inventory constraints that is leading to that [decline],” he said, “but the other overarching theme is that when pricing is strong, sellers want to cut out middlemen.”

At the same time, another market research firm sees signs dealer inventory levels are beginning to rise.

“The number of deals we’re being asked to help customers on has also picked up. That indicates to us that dealers are also starting to feel like the music may not have stopped for used trucks, but it’s slowing,” said Bennett Whitnell, an adviser with KEA Advisors, whose clients range from large dealership groups to one-truck garages that it supplies with advice on valuations using data and measurement-based metrics.

Used Class 8

“Nobody seems to feel much panic, and they shouldn’t, but the collective feeling seems to be catching up to the data,” he said.

John Whitnell, also with Lawrence, Kan.-based KEA, said sleepers and tandem-axle day cab inventory levels are rising as new Class 8 trucks get delivered and the trades are turned into used inventory.

Sleeper inventory is back to where it was in April; day cab inventory has fallen, and still is significantly lower than it was in April, but has started to rise, according to KEA’s most recent data.

“That means dealers do not feel very stressed at this time about the absolute level of their inventory,” he said, “which means they are not motivated to sell their overage units at auctions.”

KEA’s analysis is based on a representative sample of dealers that it surveys on a weekly basis, that is weighted toward different brands based on dealership size and market share.