Used Class 8 Prices Decline in October; Analysts Forecast Weaker Market in 2017
This story appears in the Dec. 5 print edition of Transport Topics.
The average used Class 8 truck sold in October entered the resale market with lower mileage than those sold a year earlier, but its sales price was down about 14% due to soft demand and an excessive inventory of unsold vehicles, analysts said.
And more pain could be in store, dealers said, as a growing number of trade-ins begin to hit the market after very strong new-truck sales in 2014 and 2015.
However, ACT Research Co. said used sales volumes in its sample managed to inch up to 2,991, a gain of 114 trucks compared with 2,877 a year earlier. That sample represents about 13% of the total market, which is closer to 23,000 sales per month or 270,000 for the year, the firm said.
The sales price of the average heavy-duty used truck fell to $39,500, compared with $46,038 a year earlier, according to ACT. It also was lower than the September price of $41,475.
“It’s not a pretty picture, but it certainly is a picture that could have been much worse,” ACT Vice President Steve Tam said. “We could have seen a more dramatic falloff on the used side.”
The fact that hasn’t happened is a testament to the underlying fundamentals, he said.
“Freight has been flat; freight has not evaporated. So we have the same amount of work to do. Unfortunately, we just have too many trucks to do it. So that is acting as an effective brake on used truck sales volumes or transactions,” he said.
Mileage dropped to 460,800 compared with 476,300 a year earlier, and the average age declined slightly to seven years, five months, compared with seven years, seven months, in the 2015 period.
In addition, the average used sleeper tractor retailed in October was 6 years old, had 463,378 miles and brought $49,661, Chris Visser, senior analyst for the American Truck Dealers/NADA Official Commercial Truck Guide, wrote in his latest report.
Compared with October 2015, the average sleeper was 5 months older, had 23,471, or 4.8% fewer miles, and was sold for $10,192, or 17% less money, Visser said.
Moreover, 3- to 5-year-old sleepers have lost about $14,500, or 21%, of their retail value since January, which is just over 2% per month, he wrote.
In terms of individual model years, 3-year-old trucks have lost about 19% of their value since January, 4-year old trucks have also lost about 19%, and 5-year-old trucks have lost about 24%, Visser wrote.
Meanwhile, 70% of dealers surveyed and representing Freight- liner and Volvo Trucks North America indicated inventory was above ideal levels, said Neil Frohnapple, an analyst with Longbow Research, who conducted the survey and released the results Nov. 22.
That compared with 75% of his contacts who previously reported excessive inventory levels, Frohnapple wrote, but it was “still very high relative to historical levels.”
Frohnapple quoted one Freightliner dealer as saying, “Prices seem like they’re getting close to the bottom, but there are still a lot of trucks that will eventually enter an already depressed market, and we feel that the worst is not yet behind us.”
Freightliner is the leading Class 8 brand for new truck sales and a unit of Daimler Trucks North America.
Volvo Trucks North America is a unit of Volvo Group.
Tam predicted used truck sales would tail off to 250,000 in 2017, down from an estimated 270,000 this year. Prices would soften, too, he added.
Even if economic activity and subsequently freight activity pick up next year, that simply will accelerate what he described as a mini-recovery.
“It is going to put underutilized units back to work, as opposed to stimulating demand for incremental units,” Tam said.
The Cass Freight Index reported Nov. 28 that data on freight movements “has been both volatile and uninspiring.”
The index found tonnage in October was up but loads — a factor the index increasingly focuses on — were down.
