Used Class 8 truck sales increased 15% month-over-month in February, according to ACT Research’s preliminary release of the State of the Industry: U.S. Classes 3-8 Used Trucks.
ACT Research
The gain was stronger than expected, as sales are typically still emerging from the winter freeze this time of the year, said Steve Tam, vice president at ACT Research. Interestingly, volumes increased across all three channels, he added.
Seasonally, used truck retail sales typically increase from January to February, but only by a few percentage points, explained Tam. Demand was not expected to improve, though pricing remains attractive, especially for the quality of vehicles available.
“There appears to be a contingent of used truck buyers that are happy with late model, low mileage units as substitutes for new trucks,” said Tam.
J.D. Power
J.D. Power’s Commercial Vehicle Guidelines released in March indicated that the auction market for February was similar to January, but pricing turned unexpectedly downward. Retail pricing was stable.
Chris Visser, J.D. Power director of specialty vehicles, noted this was an unexpected change from the stability of the previous few months. “The benchmark truck we track brought 11% less in money in February compared to January,” he said.
Visser noted that that auction pricing had stabilized in the third and fourth quarter of 2023, so February’s decline was unexpected. It looks like retail pricing may still have some depreciation to work through, he said. In both cases, excess supply is the main factor.
“Owner-operators continue to exit the industry and fleets are trading for new trucks, taking capacity out of the freight environment but adding used trucks to the market,” Visser said. He noted that an excess of used trucks was expected as the industry came down the back end of the freight bubble. What was unexpected are February’s weak pricing figures.
Price is also a primary driver to these changes, said Craig Decker, managing director who leads the Transportation & Logistics Infrastructure Group at Brown Gibbons Lang & Company (BGL).
New truck prices reached record highs during the pandemic, the result of OEM production being significantly lower than demand, explained Decker. As a result, many carriers held on to trucks longer than their typical replacement cycle, resulting in less inventory available for the used truck market. Following the price spike in new trucks, used trucks also experienced an unprecedented increase in price, leading to all-time highs.
[Related: 'Too much equipment available' in used truck market]
As the auction for bankrupt LTL Yellow Corp’s assets kicked off on March 5, it’s also worth observing its implications. J.D. Power’s report noted that it is impacting market conditions, particularly for trailers and the daycabs that comprised the majority of Yellow’s fleet.
Pricing was what you might expect for a large number of trucks and trailers released into the market in a short period of time, Visser explained. Prior to that date, it was unusual to see a noticeable number of late-model single-axle daycabs in the marketplace, and selling prices reflected the increased supply.
Decker believes that large carriers such as Estes, Saia and Old Dominion will take first shot at getting the newer equipment, assuming it meets their duty requirements, and the remaining trucks and trailers (the vast majority of Yellow’s fleet) will go to auction, but won't have a significant impact on the pricing dynamic due to age and condition.
Looking ahead, Visser stated that conditions should be weighted more toward buyers than sellers for most of this year. Tam and Decker agreed.
Freight rates continue to be soft, said Decker, and the financing market is much higher than it was a few years ago, which has a direct impact on the buyer’s ability to justify buying equipment.
Given OEMs’ penchant for putting more new trucks into the fleet that are needed, downward pressure on used truck pricing is likely to last longer, said Tam. He pointed out, “We are starting to see used truck dealers offer down payment matching, some up to as much as $10,000. This is a clear indication that dealers are having to work harder to sell trucks and are concerned about competitive pressure.”
