Share
June 23, 2022 2:55 PM, EDT

May Data Likely to Show Used Class 8 Demand Softens Again

UsedUsed Class 8 trucks on a lot. (Philadelphia International Used Truck Center via YouTube)

[Stay on top of transportation news: Get TTNews in your inbox.]

Demand in the used Class 8 market is softening, experts said, citing steady declines in both the spot freight volumes and rates that so many buyers of used trucks rely on for a living.

To complete the difficult economic picture, add on record diesel prices, inflation pushing everyday prices higher, the pressures on some paying for a truck that was financed in the past year as used Class 8 prices soared and prices remaining very elevated compared with a year earlier.

“Smaller spot market operators beholden to freight rates that often don’t adequately compensate them for rapidly escalating fuel costs have most likely lost some of their appetite for new and used high-priced trucks,” said Dan Clark, head of BMO Transportation Finance.

“Although weakness in spot market freight grabs all the headlines,” Clark said, “most for-hire truck freight channels through the contract market, which has remained relatively steady.”

Others agree some freight that was on the spot market has transitioned to moving under longer-term contracts.

American Trucking Associations reported truck tonnage rose 3.7% in May compared with year-ago levels. That marked the ninth consecutive year-over-year gain and the largest since April 2021.

READ MORE: Tonnage Jumps 3.7% in May

ATA's Bob Costello

Costello

“The transition in the freight market continued in May, with the index hitting the second-highest level since the pandemic started,” said Bob Costello, chief economist at ATA. “The traditional spot market has slowed as freight softens, but these contract carriers are backfilling any losses in freight with loads from shippers that are reducing spot market exposure. Essentially the market is transitioning back to pre-pandemic shares of contract versus spot market.”

In March, ACT estimated used Class 8 sales were 25,200. In April, sales dropped to 22,100. “We will probably see a further step down in estimated industrywide sales in May, but I think we will hang on to 20,000. Even at that, you are still looking at about another 10% sequential decline,” ACT Vice President Steve Tam said.

“One of the things we have heard from dealers is they are nervous about the market, the direction, the rate of change and that sort of thing,” he said. “So when they are buying, or when they are able to buy, they are being a lot more conservative. They will put out a bid and say ‘we will pay this much. Take it or leave it,’ because they don’t want to be stuck with high-priced inventory.”

ACT believes used truck inventory is rising as new truck sales chug along, he said. “They haven’t been high, but they are generating trades.”

Chris Visser, senior analyst for commercial trucks at J.D. Power Valuation Services, said he did not have hard data on inventory, “but I’d be surprised if there weren’t more trucks becoming available at auctions. On the retail side, dealers are probably acquiring more inventory due to increased trade-ins. Some dealers are seeing somewhat cooler foot traffic, but that depends on which sectors of the market their typical customers operate in.”

Want more news? Listen to today's daily briefing above or go here for more info

Visser said the market is primarily absorbing trucks from fleets “no longer retaining all of their older iron as new trucks trickle in and, to an extent, from owner-operators leaving the industry or going to work for a fleet.”

For May, the average price for a used Class 8 remained strong based on its preliminary findings, ACT Research noted; but a slight crack appeared.

ACT reported the average used Class 8 retail price was $99,087, down ever so slightly from $100,064 in April while up 65% compared with $59,737 a year earlier.

In its June market trends report, auctioneer Ritchie Bros. reported used truck tractor prices sold in auction are up 46% year over year in the United States, but the rate of increase is down 6 percentage points from May. Similarly, in Canada, prices are currently up 34% year-over-year for truck tractors, but down 9 percentage points from the May report.

“We have now seen two sequential months of declines for our truck tractor price indexes in the U.S. and Canada, compared to the peak levels we saw in February of this year,” said Doug Olive, senior vice president of pricing for Ritchie Bros.

The average age and mileage of a used Class 8 sold in May was within the norm, ACT’s Tam said.

The age was 6 years, 8 months compared with 6 years, 2 months a year earlier. The mileage was 434,000 in May compared with 419,000 a year ago.