Used Class 8 Market Strong in July
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July sales of used Class 8 vehicles, along with the average price for a heavy-duty truck, rose year-over-year again. It’s still a red-hot market amid less inventory than needed to satisfy demand, ACT Research and others reported.
Sales were 22,800 units compared with 18,000 a year earlier, according to ACT, and landed flat compared with June.
The average price for a Class 8 in July was $59,377 compared with $40,666 a year earlier.
According to the latest release of the State of the Industry: U.S. Classes 3-8 Used Trucks, published by ACT Research, used Class 8 volumes (same dealer sales) were 4% lower month-over-month. Longer term, volumes were down 18% y/y, but up 13% ytd.https://t.co/WsuGkrO6jJ pic.twitter.com/Xatwqh6JnE — ACT Research (@actresearch) August 26, 2021
July’s average price also fell from June’s $61,219, which was the highest in ACT’s 20-year history of record keeping.
July’s month-over-month decline was the first since January.
“Everything that we see and hear tells us that freight demand is very strong. Look at the spot rate markets,” ACT Vice President Steve Tam told Transport Topics. “The rates are not retreating in any meaningful way. And we are still beset by not having enough used truck inventory, unfortunately.”
Each month, ACT provides an industry estimate based on its survey of a sample of dealers, wholesalers and auctioneers as well as a few large fleets to determine average price, age and mileage, and estimated used Class 8 sales volumes.
One finance company executive said the number of prospective buyers coming his way had fallen off, but business is still steady.
Requests for loans on used trucks have decreased somewhat due to the vehicles’ high prices and lack of inventory, said Charles Smith, regional business development manager at Mission Financial Services Group Corp., an Atlanta-based lender.
“Most financial institutions are not going to advance on a truck that is not worth the money being asked for it. We at Mission are one of those companies,” he said, adding it doesn’t make sense to advance, for instance, $40,000 on a 2012 over-the-road model “that really is only worth maybe $18,000.”
But there are people still buying if they can find what they are looking for — “almost like finding a needle in a haystack,” he said.
At the same time, he said, Mission has seen a 40% increase over the last nine months in repair loans, typically, to owner-operators.
Smith
“We have seen an increase in repair loans due to the fact people are not trading in trucks because they can’t get new trucks,” Smith said.
He has spoken with his dealers across the regions and they told him their service departments are backed up, “literally backed up.”
Parts availability is an issue for dealers as well as truck makers trying to complete production on new trucks.
Smith said he expected the repair loans to continue as he estimated new Class 8 trucks will not be widely available until the second or third quarter of 2022.
“A lot of the new trucks that are creeping off the lines and getting to dealerships,” he said, “are already spoken for.”
ACT reported estimated mileage in July was nearly flat at 443,000 compared with 444,000 a year earlier, and up from 423,000 in June.
The estimated average age in July was 6 years, 7 months, the same as in the 2020 period, and two months higher than in June.
“Trucks that went through the marketplace in July were older and had higher miles compared with June. That is what I am ascribing the drop in prices to,” Tam said.
He added he did not believe the market was seeing a correction or an inflection point.
Meanwhile, he said the average price for 3-year-old trucks was $97,748. That was a 38% jump compared with $70,773 a year earlier.
July’s price for this segment was down slightly from $98,124 in June.
The average price for a much older truck jumped even higher.
The estimated average price for an 8-year-old truck was $27,532. That was up 60% compared with $17,054, its price in the 2020 period.
July’s average price in this segment also was higher than June’s, $23,796.
“Eventually, values will back down,” Tam said. “But the question is when does that start and how quickly the values erode. The answer is nobody knows.”
Penske Automotive has a large truck rental and leasing unit. (Penske Used Truck Center)
In an industry note, Tam wrote ACT expects the eventual catalyst for lower prices will be an orderly balancing of supply and demand, “rather than a flood of inventory that could collapse the market. It is also important to keep in mind that when prices do start to decline, it will be from record high levels.”
One public company, among others, reaping the benefits of high used truck prices is Penske Automotive, which has a large truck rental and leasing unit.
“The gain on sale of used trucks is up 245% to $45 million,” Roger Penske, chairman and CEO, said during the company’s latest earnings call. “A strong freight environment and shortage of both used trucks and new trucks is driving demand for used vehicles.”
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