April 29, 2020 11:45 AM, EDT

March Used Truck Prices Continue 2020 Slide

Manheim auctionManheim Specialty Auctions' Indianapolis location. (Manheim)

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Class 8 used truck sales in March slipped 12%, and the average price dropped about $7,000 compared with a year earlier, ACT Research reported.

Sales of used vehicles hit 18,000 compared with 20,500 a year earlier, according to ACT, which each month 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.

Year-to-date sales were 52,500, down 24% compared with 68,900 a year earlier.

The average price dropped 15% to $37,975 compared with $44,658 in the 2019 period. It was the 11th consecutive month of year-over-year price declines.

“The industry is hard pressed to move units now,” ACT Vice President Steve Tam said. “That is due in large part not only to the economic hand we have been playing for the last year, but even in this March data, I think you are seeing a little bit of the impacts of COVID-19 creeping in.”

He suggested, however, smaller carriers may have added an older used truck to go after the loads that were “flying around” as grocery stores restocked as quickly as they could.

The age of the average Class 8 sold in March was 6 years, 8 months compared with 7 years, 1 month a year earlier. Mileage on that truck was 460,000 compared with 470,000 miles a year earlier.

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Owner-operator Chad Boblett, posting in the Rate Per Mile Masters group on Facebook, wrote, “Trucks are being sold so inexpensively, and I think it will keep getting cheaper. I am sure I can snag up 4 to 5 of these deals in the months to come without a too big of a problem, but becoming a fleet of 6 overnight will kill my insurance cost.

“So to make this work might require leasing to a bigger fleet or a low-cost [virtual trucking] service like CloudTrucks. I am confident in running a fleet from the spot market, even with the slowdown we are having now, but insurance cost is always the punch to the gut.”

RPM, a group Boblett created and moderates, has 29,000 members.

American Trucking Associations reported 91.3% of fleets are six or fewer trucks.

Tam said the spot market in April has seen loads and rates drop off.

“There is just a storm brewing, I think, in that market,” he said.

ACT is expecting this COVID-19-driven part of the cycle to be deep but short, with the turn coming in late Q3 or early Q4. But before that occurs comes the descent into the “abyss,” Tam said.

“We believe we are going to see freight contract more than 25% in the second quarter and probably be down 2% in Q3,” he said. “Then a strong resurgence in freight growth comes in the fourth quarter.”

Meanwhile, John Whitnell, an adviser with KEA Advisors, said truck dealers’ inventory has crested, and that is partly why auction sales in the second quarter will not increase compared with the first-quarter activity, which was “already high.”

KEA, based in Lawrence, Kan., follows eight or nine national auction houses, and those make up about 95% of the auction activity.

Tam noted most, if not all, of the auction houses can conduct remote sales, but not every dealership is in that position.

“So that gives the auctions an advantage in these unique days we live in,” he said.

ACT’s yearly sample in 2019 — which represented 25% of the total market — showed 60% of Class 8 sales came through retail channels, 20% through auctions and 20% were wholesale transactions.

Additionally, truck makers began temporary shutdowns in April, some of which have since been lifted, Whitnell added.

“This will severely disrupt the supply of new trade-ins units into the used truck market,” he said. “So inventory levels are coming down, and the next wave of trade-ins is 60 to 90 days down the road. This affords dealers with the opportunity to be patient.”

C.R. England Inc. relies on its residual values with the dealerships when it trades in trucks, a company executive said.

“That’s the way among the larger carriers that their transactions work,” Tam said. “They negotiate an entire trade package when they purchase new equipment.”

C.R. England ranks No. 26 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

Paccar Inc. is emphasizing retail sales of its used trucks and recently opened a new used-truck center in Denton, Texas. Paccar’s two North American brands are Peterbilt Motors Co. and Kenworth Truck Co.

“And the margins we make when we sell a used truck to a retail customer are significantly higher than selling them to wholesalers or other customers,” Paccar President Harrie Schippers said during a recent earnings conference call. “So those used truck incentives, they’re really giving us a very nice return on our investment there.”

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