Used Class 8 Market Softens More in September
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Used Class 8 sales in the U.S. were down again in September, the average retail price fell, too, and likely steeper declines are ahead, ACT Research reported.
“We are just sort of muddling along” on sales, ACT Vice President Steve Tam told Transport Topics.
ACT estimated retail sales were 21,500 in September, down from 22,800 a year earlier and flat with levels over the past couple of months.
Tam said ACT likely would lower its estimate for annual sales in 2022 by more than its earlier estimate in the range of 5% to 6% — ahead of a relatively short and shallow correction it sees coming in 2023 that could drop GDP by 0.5%.
ACT Research: Used Class 8 Retail Sales Dropped in September, Exceeding Seasonal Expectationshttps://t.co/4h9lxv7K6p — ACT Research (@actresearch) October 26, 2022
“I think we need to be down further than that [in 2022]. The spot rate market continues to deteriorate, and the trucking participants in that market are typically used truck customers. If they are not seeing good signs on the horizon, they likely are not going to be in the market for equipment,” Tam said.
The average retail price for a Class 8 was $84,282, which still is way above the 2021 period’s $69,968 but down 3% from $86,962 in August, according to ACT.
He said there has been a rapid deceleration from the peak — down almost 40% from where prices were in March or April.
2022: 6 years, 4 months
2021: 6 years, 5 months
August 2022: 6 years, 7 months
Source: ACT Research
On average, prices have been falling about 8% a month, he added.
“That the average age dropped could be one of the reasons prices didn’t fall as much,” Tam said.
Each month, ACT surveys a sample of dealers, wholesalers and auctioneers as well as a few large fleets to determine average prices, age and mileage, and estimated industry volumes.
One executive with a company that finances used truck sales and repairs said the company reviews auction prices weekly from around the country.
“This gives us an idea of where the market is with used Class 8 vehicles. We see that [auction] prices are slowly receding to where dealers can purchase at a good price and pass the saving on to the consumer,” said Charles Smith, regional business development manager at Mission Financial Services Group Corp. The Atlanta-based lender, in business since 2000, holds 85% of its portfolio in commercial lending and offers loans in 40 states.
Recently, the fuel crisis, which still is a concern, wasn’t a factor in used truck buyers shying away from purchasing, Smith said. “Price and availability were and still are the culprits.”
He reiterated Mission has seen a large increase in repair loan applications being processed to accommodate these owner-operators looking to maintain the high-mileage trucks they have.
Meanwhile, “The usual peak period for van freight looks more like a mesa,” reported Ken Adamo, chief of analytics at DAT. “The month-over-month decline in September truckload volume suggests that many retailers already have inventory in position, have tempered their expectations for the holidays, or some combination of the two.”
CEO David Jackson of Knight-Swift Transportation said during the company’s recent earnings call that small carriers that bought a used Class 8 truck over the past 18 months “grossly overpaid” compared with valuations now.
“And I think that’s just beginning. Anecdotally, we hear from those that have receivables with small carriers, it has turned ugly very, very quickly for them,” Jackson said. “It began in the early part of the year, and it has accelerated dramatically. And so the pressures just continue to mount.
“I wouldn’t be surprised if there aren’t many small carriers that were just holding out hope for the fourth quarter, a strong fourth quarter to bail them out of a tougher summer with no spot, because many of them have found themselves very dependent on the stock market or very dependent on a non-asset broker who used to be able to charge a much higher rate to the customer and pass a lot of that through. And so there is rightsizing that’s happening as we speak.”
North American truck dealership Rush Enterprises Inc. reported revenue from used truck sales in Q3 was $131.5 million compared with $103 million a year earlier.
“That said, used truck values have declined significantly since their peak earlier this year,” Chairman and CEO W.M. “Rusty” Rush said during the company’s latest earnings call. “As a result, we have reduced our inventory to historically low levels to navigate uncertainty in used truck values moving forward.”
The company slashed used truck inventory to 1,200 vehicles from 2,400 earlier, he said.
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