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January 29, 2019 9:45 AM, EST

Used Class 8s Cost More in December; Sales Flat

Used International trucks on a Philadelphia lotTruck Center via YouTube

The average used Class 8 in December was slightly older, had more mileage and sold for 9% more compared with a year earlier, as sales were flat, according to ACT Research Co.

The volume in December was 21,000 units, even with a year earlier, according to ACT, which surveys dealers, wholesalers and auctioneers as well as a few large fleets to determine average prices, age and mileage, and volumes.

Annual sales rose to 280,000 compared with 267,900 a year earlier, with 2018 the highest volume since ACT began tracking sales in 2003.

“It goes back to dealers not having as much inventory available to them and as much as customers would like,” ACT Vice President Steve Tam said. “It hasn’t changed, it just continues.”

He’s not satisfied with that explanation, he said. “But it does fit into the bigger story of how on the new truck side, folks are having trouble getting access to their new trucks. So they are not trading as quickly. It’s keeping a lid on the activity in the secondary markets.”

In December, same-dealer sales slipped for a second consecutive month, falling 7%, and marked the first time since January 2016 that these sales have fallen below 2,000 units. Same-dealer sales come from outlets ACT surveys that report consistently and have historical data.

One fleet executive said he was cautious about the used truck market.

John Elliott

Elliott

“I am concerned that the truck orders have been overheated, and that is possibly going to lead to a glut in the used truck market at some point in the near future,” Load One CEO John Elliott said. “That will obviously be bad for resale prices.”

“So we took a little bit more of a pullback, and a wait-and-see approach, to ordering for 2019,” he added.

Load One is a transportation and logistics company based in Taylor, Mich., with 70 company drivers and 345 owner-operators.

At the same time, prices are modestly higher, pleasing the sellers and dealers.

In December, the average truck sold for $48,300, up 9% from $44,200 in 2017.

For the full year, the average price rose 10% to $44,600 compared with $40,700 a year earlier.

Tam noted about 30% of used Class 8s sold in the first half of 2018 had automated manual transmissions and an additional 7% had full automatics, he said.

So even though buyers are paying more, it is arguably for a higher quality, higher content vehicle. But Tam doesn’t think all of the price increase is associated with that.

“There’s still a supply-and-demand component that’s driving prices up,” he said.

The average truck in December had 438,000 miles compared with 423,000 miles in 2017. Those higher miles could be “early inklings” that trucks that fleets held on to longer than normal have begun to work their way into the marketplace, Tam said.

In December, the average age was 7 years compared with 6 years, 11 months a year earlier.

ACT expects to see age and mileage continue to increase.

Market conditions are maturing as 2019 gets underway, Chris Visser, senior analyst for commercial vehicles at J.D. Power, wrote in a recent blog,

“There were no real surprises to close out the year, with used trucks with average and lower mileage bringing very strong money,” he wrote.

The average sleeper tractor retailed in December was 69 months old, had 459,967 miles and brought $57,235. Compared with a year earlier, this average sleeper was four months newer, had 28,042, or 6.5%, more miles and brought $9,905, or 20.9%, more money, according to Visser.

Meanwhile, “The industry appears to be coming down the far side of the plateau, as the beat-the-tariffs business inventory buildup is behind us and 2018 tax breaks become simply the new cost of doing business,” Visser wrote. “Deliveries of new trucks will remain strong into the second half of 2019, but it looks like demand is on the downward slope as supply heads in the other direction.”

Another analyst said the market was stable and would be going forward.

Mizuho analyst Kristine Kubacki published a note on truck equipment after a conference call with John and Bennett Whitnell of KEA Advisors.

“While we may see some pricing pressure with added supply coming from the OEMs in the first half of 2019, the easing in pricing should be notably less than the last run-up,” she wrote. “Exuberance is absent from this used truck cycle. Unlike previous strong used markets, where dealerships drove up the pricing on used trucks with the financial backing of OEMs, dealerships today have a leaner used truck inventory.”