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September 24, 2020 2:30 PM, EDT

Dealers Jumping Back Into Used Class 8 Market

August Sales Down 13.9% Year-Over-Year; Market Improving
Used Class 8 FreightlinerA used Freightliner for sale at Hammer Truck Sales in Salisbury, N.C. The used Class 8 market is improving, according to ACT Research. (Hammer Truck Sales)

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The Class 8 used truck market in August reflected the trend toward improving sales as prices remained below year-earlier levels, conditions that are expected to mark the full year, ACT Research reported.

Sales reached 18,500 in August, down 13.9% compared with 21,500 a year earlier, but up slightly from 18,000 in July, according to ACT’s estimate.

Year-to-date, sales fell 10.5% to 149,400 compared with 167,000 in August 2019.

ACT Vice President Steve Tam

Tam

“Before COVID-19, used truck sales were down about 25% to 30%. So they are considerably less negative now than they were,” ACT Vice President Steve Tam said. “We are narrowing the gap. We are nibbling away, making progress.”

ACT expects used Class 8 sales to increase in 2020 over 2019 due to available freight, tightened capacity and a “stellar” spot rate market, which is attracting people to the trucking industry, and their entry point is the used truck market, Tam said.

Prices, he added, may be positive year-over-year in December, but on a full-year basis, the value of a used Class 8 in 2020 will lag behind 2019.

The average price of a used Class 8 sold in August was $38,442 compared with $42,905 a year earlier, marking the 16th consecutive month of year-over-year price declines. It rose from July’s $36,632.

The dealer-to-dealer, or wholesale, market, Tam said, is improving as “dealers jump back in” and is actually outperforming the retail side of the business in terms of price increases.

“On the wholesale side, we broke that string of lower year-over-year comps this month. They actually had a 4% increase year-over-year,” Tam said.

He also said the auction market that ACT tracks was getting less equipment as much of the bidding moved online, but is starting to come back. “I think that has been a challenge for the industry.”

Conditions in the used truck market have been improving since June, one truck dealership executive said.

Trey Golden, vice president of used truck sales at Rush Enterprises

Golden

“The used truck market has slowly improved since then,” said Trey Golden, vice president of used truck sales at Rush Enterprises. “While we cannot be certain where it goes from here, we are cautiously optimistic the market will continue to strengthen as we look ahead.”

He added: “There seems to be a good balance between supply and demand right now, with broad-based demand across most market segments and all classes of vehicles.”

Average mileage for a used Class 8 dipped to 450,000 compared with 456,000 a year earlier, according to ACT.

The average age was 6 years, 6 months, compared with 7 years, 1 month, in the 2019 period.

Each month, ACT surveys a sample of dealers, wholesalers and auctioneers as well as a few large fleets to determine average price, age and mileage, and estimated industry volumes.

One Atlanta-based lender has seen a surge in applications from first-time buyers.

Charles Smith

Charles Smith, regional business development manager at Mission Financial Services Group Corp. (Courtesy Charles Smith)

“With the influx of people looking to enter the trucking industry, the increase in application submissions has increased about 35% with us compared with a year earlier. Although many may not qualify under our lending guidelines, that still hasn’t deterred applicants from applying, whether with us or our competitors,” said Charles Smith, regional business development manager at Mission Financial Services Group Corp.

“With spot rates increasing, we see more people flocking toward the trucking industry, as well as company drivers looking to move to [being] owner-operators,” Smith added.

Tam noted while freight is plentiful now, it remains below pre-pandemic levels.

“We are not back to pre-COVID-19 levels of freight, and we don’t expect to get back to those types of numbers probably until the second half of next year,” Tam said.

Another industry consultant forecast the rate of growth rate in linehaul freight volumes will slowly decelerate to about the growth rate of retail sales, as retail inventories approach equilibrium.

“Households’ balance sheets cannot sustain strong growth in spending due to high unemployment, moderating employment gains and slowing federal government transfer payments, but households’ balance sheets can sustain sluggish-to-moderate growth in spending,” Chris Brady, principal at Commercial Motor Vehicle Consulting, wrote in a note.

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In the meantime, winter coming to colder climates will not deter used truck buyers, Smith said.

“As a regional rep covering the Northeast and the Great Lakes regions, I’ve noticed that customers will endure inclement weather to obtain a product that they’re looking to obtain. We as humans are impulse buyers. If we see a product that we want, we’ll do what we have to do to obtain it. The weather really plays a minimal role in closing deals,” he said. “A great salesman should be able to close a deal in a monsoon.”

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