June 28, 2018 4:30 PM, EDT

Used Truck Sales Top 31,000

Inventory Tightens in May
Used Trucks John Sommers II for Transport Topics

Sales of used Class 8 trucks in May climbed 19% as first-time buyers continued to enter the market amid a drop in inventory for sale and an upward trend in the average price, while freight rates remained strong, analysts said.

The monthly volume hit 31,800 as it improved on 26,723 sold a year earlier, ACT Research Co. reported.

RELATED: May Class 8 sales climb 18.1%; analysts expected more

The average price was $45,000, which was above ACT’s six-month average of $43,000.

May’s price dipped below the average price of $45,500 in the 2017 period.

ACT surveys dealers, wholesalers and auctioneers, as well as a few large fleets, to determine average prices, age and mileage.

“Usually, we see it slow down in late spring, early summer, but the jump in volume indicates what dealers are calling almost a great market right now,” Brian Armstrong, information systems manager at ACT, told Transport Topics.

At the same time, some dealers are having trouble finding inventory that they can actually sell. “So it is almost becoming an inventory issue — finding the right truck for the right price,” he said.

A short supply of trucks could inflate the prices of those that are available until the inventory balances out, he said.

“It possibly depends on where you are,” Armstrong added. “But it could be an interesting summer.”

On a year-over-year basis, the retail and wholesale markets were up 18% and 14%, respectively, while the auction market fell 12%, according to ACT.

The average mileage was 400,045, compared with 449,000 a year earlier.

The age on the average Class 8 truck dropped to 6 years, 9 months. In the 2017 period, it was 7 years, 1 month.

One survey of Freightliner dealers by a financial analyst found 95% of those dealers indicated that used truck demand at their dealership has increased in the second quarter compared with the first quarter.

In many cases, they reported some customers switched to buying used trucks because of the extended lead times for new Class 8 trucks.

Another analyst pointed to other causes of the lower inventory levels.

“Based on historical deliveries and new truck orders, we should be seeing a lot more 3- to 5-year-old trucks entering the market. But thanks to the substantial increase in freight demand that started early last year, these trucks are being kept in service instead,” said Chris Visser, senior analyst for commercial vehicles valuation services at J.D. Power.

“As a result, depreciation has been minimal for trucks with under 500,000 miles. For the lowest mileage trucks, there has even been some mild appreciation,” he said.

Meanwhile, the mandate requiring most truck drivers to record their hours of service using electronic logging devices is another reason fleets are keeping more trucks in service, he said. “Strict enforcement of new hours-of-service rules means more trucks are needed to move the same amount of freight.”

Meanwhile, financing used trucks effectively requires buyers to do their homework and learn the pitfalls of unfavorable loans, said one executive with a commercial lender.

“We educate our customers and explain to them the questions they need to be asking and to beware of the products being offered them [elsewhere within the industry],” CAG Truck Capital CEO Chris Grivas said.

The Chadds Ford, Pa.-based company’s website has a section titled buyer beware. Topics covered include: undisclosed fair market value buyouts, cash upfront, no early payoff and security deposits and advance payments.

“Also, we report a loan to all the credit agencies and PayNet so that startup [buyer] now can be visible and move up the chain and be a very active participant in the truck market and grow their business,” Grivas said.

PayNet provides credit ratings on small businesses.

Besides financing used trucks, CAG loans for engine rebuilds. Grivas said financing of trucks and engines, together, at his company is up about 17% year-to-date compared with last year.