May Extends Slide in Used Class 8 Truck Prices

Used sleepers on a lot. (Ameritruck)

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The year-over-year average price of a used Class 8 vehicle fell for the 13th consecutive month in May. Sales at retail outlets held up, while inventories headed down because there was no deluge of equipment flooding the market as a casualty of the COVID-19 pandemic, ACT Research reported.

The average price fell 15.5% to $36,954 compared with $43,774 a year earlier. May, however, posted a slight improvement over April’s $36,385, according to ACT.

“The retail market seems to be holding up reasonably well. It’s kind of resonating with that same theme we are hearing everywhere else: We’ve bounced off the bottom and things are starting to come back,” ACT Vice President Steve Tam told Transport Topics, noting much still depends on managing the pandemic.

Tam

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.

Another analyst anticipates prices to firm up shortly.

“We expect used truck prices to firm in the short term, then increase. The increase will probably happen in fits and starts, based mainly on the degree of economic reopening combined with a decrease in used truck supply. Virus infection spikes are a big wild card limiting our ability to predict when a market shift could begin,” said Chris Visser, senior analyst of Commercial Vehicles at JD Power.

“That said, we have not changed our pre-COVID predictions for sleeper tractor residual values for mid-2021 and later. In other words, we expect the market to return to ‘normal’ value trends by mid-2021,” Visser added.

ACT maintains 2020 is not going to be as good a year as 2019 from a volume perspective. “Particularly in light of this second wave of COVID-19 infections,” Tam said. “That is certainly not going to help the case at all.”

ACT estimated used Class 8 sales dropped 23.7% to 16,400 compared with 21,500 a year earlier. Sales also slipped below April’s 17,200.

Year-to-date sales dropped 17.6% to 86,100 compared with 104,500 in the 2019 period.

As for inventories, the story continues to be softer demand rather than an oversupply of trucks, Tam said.

“What we are hearing and seeing in the listings, and what not, is that we have sort of reached a plateau point and are trickling down. It would appear we dodged a bullet from a huge surge in inventory. There is an increase in inventory but it has been an ongoing theme in the last year and a half. It has been a very measured increase as we lost traction along the way. Not these nightmare scenarios like we have seen in the past where scads and scads of trucks headed into inventory,” he said.

He cited stimulus efforts like the Paycheck Protection Program that have at least helped some, who might have been on the bubble, to hang on longer.

The PPP has been extended and resumed accepting applications July 6. The new deadline to apply for a PPP loan is Aug. 8, the Small Business Administration reported.

READ MORE: House Clears Extension of Small Business Loan Program to August

“We’ll see what happens when those incentives run out. Hopefully, that all works out for the best for these guys,” Tam said.

Meanwhile, the age of the average Class 8 sold in May was 6 years, 9 months compared with 7 years, 5 months a year earlier. Mileage on that truck was 455,000 compared with 470,000 in the 2019 period.

Another analyst said truck makers’ production shutdowns choked off the supply of used trucks taken in trade, while retail demand from March-May was solid.

Visser

“Consequently, inventory levels have started to drop rapidly. Rapidly [to about 32,000 compared with about 37,000 in April]. Therefore the tension that causes dealers to take overage units to auction sales is lessening every week. We could well be in a shortage condition for used truck inventory by [fourth quarter] if OEM production doesn’t resume in August. Inventory is declining and auction sales will fall in a corresponding fashion,” said John Whitnell, an advisor at KEA Advisors.

KEA’s clients range from large dealership groups to one-truck garages that it supplies with advice on used truck valuations using data and measurement-based metrics.

At the same time, Fleet Advantage is offering to buy a fleet’s used trucks then lease them back to that fleet until such time as the fleet is ready to lease new trucks from the company at a pre-determined, fixed monthly payment.

The sale-leaseback transaction generates an immediate influx of cash for a fleet and produces an ongoing reduction in fleets’ overall costs, according to Fort Lauderdale, Fla.-based Fleet Advantage, which has $1 billion of assets under management.

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