Used class 8 truck market in last two months marked by slow activity but strong prices: JD Power

The restrained supply of new vehicles coming into the market is running alongside strong demand, and the result is a slower but stronger used truck market, according to JD Power.

The latest monthly report by the company refers to the volume coming into the market as “very low” with prices “stable to upward.”

Specifically, the average price of a 2015 sleeper tractor sold at auction in July rose 13.9% from levels in June, according to the report. The decline for 2014 vehicles was 8.7% and for 2013 vehicles, the posted increase was 4%. The average prices for those three years was $47,000, $34,250 and $30,000, respectively.

“(The prior JD Power report) showed an increased volume of trucks moving through auctions in June, which may indicate a return to more normal trade activity,” the company said in its monthly report. “That’s not yet the case, judging by the very low volume of trucks moving through auctions in July.”

Specifically, the volume of the three model years sold through auction—defined as the “three most popular sleeper tractor”s– dropped to 100 from 298 a month earlier in sales made by what JD Power said were the two largest nationwide auction companies. That was the lowest level since January.

“Deliveries of new trucks have been ramping up since the beginning of the year,” Chris Visser, JD Power’s senior analyst and product manager for commercial vehicles, told FreightWaves. “But we’ve seen some production restraints because of component shortages.”

Visser said the relationship between used truck prices and new vehicle sales is not inverse, even though it might be thought to be since higher new vehicle sales can result in more used vehicles hitting the market. To the contrary, Visser said, “the rising tide lifts all boats.” In a strong market, a late model used truck will be a “good substitute” for a new truck at half the price, resulting in demand for the used vehicle, according to Visser.

That relationship has been fairly consistent through history, Visser said. Exceptions might be seen at times when there is heavy pre-buying of vehicles–possibly because of a change in environmental specifications–or when an individual OEM tries to grab market share by setting off a price war.

On the retail front, the average sleeper tractor sold in June through that channel was 83 months old, had a bit more than 450,000 miles on it and brought $51,734. That was 0.7% less than May in terms of miles, and was 2.5% less in terms of price. But the price in June was 8% more than June 2017.

Specifically, the 2016 trucks sold at retail went for an average of $81,858, up 8.9% from May; the 2015 trucks went for $64,672, 2.3% less than May, and the 2014 trucks went for $48,310, down 1.3% from May.

The overall six-month figure for late-model trucks sold in the first half of 2018 was 5.6% more money this year than the prior year. Depreciation was just 1%, compared to 1.7% in 2017.

Medium duty trucks were weak, according to JD Power. Class 3-4 cabovers had an average resale price of $13,059, down 10.6% from May and a whopping 25.9% less than June 2017.

In the report, JD Power said volume was up in the class 4 and class 6 categories, “but that doesn’t appear to have been a factor in average pricing this month.” Still, Visser said supply does tend to be a significant issue in the market for medium-sized trucks, dependent on rental firms’ decision on when they choose to liquidate a portion of their inventories.

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.