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The price of the average used Class 8 truck sold in August fell year-over-year for the first time in 20 months as inventory piled up, ACT Research reported.
The price dipped to $45,173 compared with $45,842 a year earlier, according to ACT. It was the first such decline since January 2018.
“Pricing is finally starting to see some erosion,” although the drop was modest, said ACT Vice President Steve Tam, who called the moment an“inflection point,” which typically marks a significant change.
Class 8 prices in the wholesale and auction markets took much harder hits.
Auction prices dropped in the 20-25% range and wholesale prices 15-20%, sequentially and year-over-year, he said.
“These are primarily dealer-to-dealer markets. Dealers are already sitting on a growing inventory of trucks, so they are reluctant to purchase any more units,” Tam said. “The sellers’ natural reaction, in this case, is to drop the price to entice buyers to act — and the race to the bottom commences.”
ACT surveys a sample of dealers, wholesalers and auctioneers as well as a few large fleets to determine average price, age and mileage, and volumes.
But pricing is only part of the story, according to Chris Visser, senior analyst for commercial vehicles at J.D. Power.
“The underlying story is used truck inventory. Since midyear, strong new truck deliveries have resulted in a supply of trades that simply saturated the market,” Visser wrote in a recent blog. “Numerous bankruptcies of smaller fleets have probably mildly exacerbated the situation.”
Meanwhile, used Class 8 sales in August fell 14.6% to 21,500 compared with 25,200 a year earlier.
Year-to-date sales have dropped 11.2% to 167,000 compared with 188,100 in the 2018 period.
“That’s based on the fundamentals of there is just less work out there available, and so less demand for trucks. Not only on the used, but the new truck side, as well,” Tam said.
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U.S. retail sales of new Class 8 trucks fell 1.9% to 23,466 in August compared with a year earlier, WardsAuto.com reported.
The average used Class 8 also had fewer miles and was slightly older.
Its mileage dropped to 440,000 compared with 454,000 a year earlier.
The lower mileage indicates more trucks are chasing less freight, and so driving fewer miles, Tam said. “You are spreading less work among a bigger base, so they are not as productive, or as efficient.”
The average age increased to 7 years, 1 month compared with 6 years, 10 months a year earlier.
One multistate truck dealer said the topic of used trucks kept him up at night.
“Not that we don’t know the market has been going down,” Summit Truck Group President Justin Fink said. “It’s just challenging for a dealer who wants to be able to offer good value and be responsive for their customers.
“To have that role in the market takes a lot of discipline. It takes resources that are organized to be able to do that. Used trucks is definitely a challenge.”
Summit operates 24 locations in seven states within an area defined by Kansas City, Mo., atop a triangle whose other points are Memphis, Tenn., to the east and Oklahoma City to the west.
It represents International Truck, Volvo Trucks North America, Mack Trucks, Ford Motor Co. and Isuzu Commercial Truck of America.
A soft used truck market can slow down deliveries of new trucks in some cases, said Troy Clarke, chairman and CEO of Navistar International Corp., whose subsidiary Navistar Inc. makes the International brand.
Clarke said some of International’s customers have to figure how to dispose of their used trucks right now in a market where prices are being pressured by rising inventories of sleepers less than 5 years old.
“We’re slipping into that thing we’ve been in the past, where they go to the market with a truck that has a book value, and if the market’s value is below that then they have to work that equation a little bit more so that they don’t take a loss. And that sometimes gets in the way of our delivery,” Clarke said during the company’s most recent earnings call.
That happens with very large customers, and very small customers, he added.
“We have the ability to help somewhat in used trucks, OK, but, we’ve been in difficulties in used trucks in the past,” Clarke said. “And so we’re working to manage that very, very seriously as well.”