'Too much equipment available' in used truck market

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Updated Feb 22, 2024

Driven by freight demand and truck utilization, the used truck market is one to watch.

Class 8 same dealer used truck retail sales received a boost in January, notably at 17% month-over-month, according to preliminary numbers from ACT Research’s State of the Industry: U.S. Classes 3-8 Used Trucks. With sales usually slow in the beginning of the year, the retail sales gain is uncharacteristic, said Steve Tam, vice president at ACT Research. January retail sales historically lag the average month by about 9% and see an eight-percentage point decline from December, he explained.

“Auctions were 59% lower month-over-month, while wholesale activity slumped 20% month-over-month,” he said. “In total, the used truck industry declined, with preliminary same dealer sales slowed 31% month-over-month.”

Tam believes there’s a combination of factors leading to better-than-expected sales: the availability and the price of equipment. With a variety of choices available, buyers can acquire new trucks at every price point. “Make no mistake about it," Tam added, "lots of new trucking companies are getting operating authority every day.”

Likewise, Tam said inventory levels are elevated and likely to head higher, while the pace of new entrants is likely to show. Combined, those considerations will keep downward pressure on pricing in the first quarter of the year, keeping the pricing pendulum in the buyers’ court. 

J.D. Power’s Commercial Vehicle Guidelines released in January indicated that auction volume was up substantially in December 2023, but pricing was surprisingly stable. Retail sales volume remains depressed, and pricing is now comparable with the weak period of 2019. Conditions should remain similar in the first two quarters of 2024, it said.

The report also noted that December saw the highest volume of sleeper tractors sold at auction since the June 2020 spike. The ongoing capacity adjustment combined with year-end liquidations were the main factors behind the increase. Surprisingly, hammer prices at auction remained relatively stable for most trucks. Depreciation for the benchmark trucks was nonexistent in the fourth quarter, it noted. 

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Chris Visser, J.D. Power director of specialty vehicles, noted that the auction and retail markets are performing differently as the correction from the COVID pricing peak matures.

“Auction devaluation has largely played out, with pricing settling in roughly between the pre-pandemic peak of 2018 and the pre-pandemic bottom of 2019,” he said. “Retail pricing has continued to drop, now comparable to that pre-pandemic bottom. Auction pricing is now low enough where supply and demand are theoretically close to equilibrium. On the retail side, equity, financing, and a weaker freight environment have continued to limit the number of potential check writers.”

Class 8 retail sales volume remains very slow, Visser added, but pricing looks to be stabilizing. January’s retail data shows essentially no change from December, "which would fit our rule of thumb that retail trends lag auction trends by about three months."

Talking about the significant factors that could impact the market in the year ahead, Visser noted that there are too many trucks available for the volume of freight the nation needs to move.

“Iron seems to be changing hands relatively well in the auction environment, while the retail environment continues to contend with negative equity and tough finance rates,” he said. “These conditions will remain through mid-year at least, at which point the freight market could start to turn around roughly concurrently with a more digestible supply of incoming trades. Used truck pricing roughly correlates to the truck utilization rate, which most analysts forecast to bottom out sometime in the third quarter.”

Looking into recent trends, Visser noted that any fleet that sells its own used equipment usually turns to the auction channel when the market is weak. “Now would be one of those times,” he pointed out. “Fleets looking to offload equipment in the short term would be advised to do so now, since pricing isn’t going to improve in the next few months, especially for higher-milage equipment.”

NationaLease Senior Vice President of Remarketing Services Dale Tower noted that by expanding their offerings, the company has maintained adequate sales activity. However, they have seen the continued degradation of pricing as well. “Demand is uniformly down across the board with the exception of very low mileage late model sleepers,” he said.

“Without an exceptional event occurring, we do not see the market returning to a sellers’ market in 2024,” Tower said. “There is just too much equipment available.”

Looking ahead, Tower believes there could be factor that could stimulate freight growth, such as inflation in housing slowing down, along with reduced interest rates and energy costs. “It’s an election year, so it would not be surprising for the incumbent to again put huge pressure for energy price reduction as previously for the mid-terms,” he said.   

“It’s all about finding adequate freight and having that pay in a fair range. Better if they can find contracted freight in these ranges,” Tower added. “Current spot rates have improved but not to the level to make anyone upgrade their equipment or try to add additional trucks or drivers.”

Pamella De Leon is a senior editor of Commercial Carrier Journal. An avid reader and travel enthusiast, she likes hiking, running, and is always on the look out for a good cup of chai. Reach her at [email protected]