Compared to the white-hot seller's market that was much of the previous two years, now is definitely a buyer's market for used trucks. The problem, however, is a stagnant rate and load environment is drawing in fewer buyers.
The excess capacity created in 2020-2022 continues to make its way through the auction and retail markets and Chris Visser, J.D. Power's director of specialty vehicles, said the industry still has a substantial volume of trucks to “burn off” before pricing will stabilize, adding end users also face a substantially tougher credit environment.
According to the latest State of the Industry: U.S. Classes 3-8 Used Trucks, published by ACT Research, used Class 8 retail volumes dropped 23% month-over-month in April. Average mileage declined by 1%, with average price down 8% and age up 3%. Longer term, average volumes, price and miles were lower, with age flat year-over-year.
While sales normally decelerate in April, the decrease was greater than the expected 8% to 10%, said ACT Research Vice President Steve Tam. "With inventory on the rise, and more importantly, not a limiting factor for sales, the logical conclusion is that demand is softening," he added. "This is a plausible explanation, especially given waning economic and freight conditions.”
Visser said looking back over April, Class 8 auction pricing continues to depreciate heavily and Class 8 retail pricing is now slightly below 2018 peak, adjusted for inflation.
After spiking 93% month-over-month in March, auction activity shrank 45% month-over-month in April. Wholesale transactions improved, jumping 72% month-over-month Tam said. “Combined, the total market fell 28% m/m in April. As the year progresses, the year-to-date scenario also continues to diverge from last year," he added. "The overall market extended its lead to 5% year-to-date. Despite the early lead, we believe that truckers’ appetites for used equipment will be curbed as freight volumes continue to contract. Our best estimate suggests that inventory continues to increase, supporting buyers working to refresh their used truck fleets.”
Late-model trucks averaged 8% less money at auction in April than March, according to J.D. Power, and 48.5% less money than April 2022. In the first four months of 2023, late-model sleepers brought 47% less money than the same period of 2022. Monthly depreciation in 2023 is currently averaging 5.8%. The newest model years available in the marketplace are bringing about 20% more money than the strong pre-pandemic period of 2018, assuming average mileage per year, Visser said, adding that "if we adjust values over time to 2023 dollars, that difference drops to parity."
Four-year-old trucks continue to cycle through auctions in substantial numbers, according to J.D. Power. Visser said most of these trucks are high mileage trucks off-rental. "Our averages adjust for mileage, but trucks of this age with lower mileage are bringing stronger money," he noted.
The retail market is fairing slightly better
Three- to five-year-old trucks brought an average of .2% less money than March, and 35.2% less than April 2022. The first four months of 2023 averaged 28.0% less money than the same period of 2022, according to J.D. Power. Monthly depreciation in 2023 is currently averaging 4.2%. Late-model sleepers are bringing about 19% more money than the last strong pre-pandemic period of 2018, Visser said, assuming average mileage per year. "If we adjust values over time to 2023 dollars, that difference is slightly below that 2018 peak," he added "The substantial decrease in the model-year 2022 average is due to a large group of one specific model selling for unimpressive money which artificially affected the average. Actual market conditions are not as bad as that figure might suggest.
Daycabs continue to hold their value substantially better than sleepers in 2023, Visser said.