Stratospheric prices for newer-model used trucks are becoming the norm as new truck orders fall deeper into a backlog worsened by a microchip shortage and other supply chain constraints.
“From a margin perspective in the first quarter, that was the highest used margin that I can ever remember,” said W.M. “Rusty” Rush, chairman, CEO and president of Rush Enterprises, the nation’s largest chain of commercial vehicle dealerships. “I expect going forward that used truck margins will still remain high, maybe not quite that high.”
Preliminary used Class 8 volumes rose 29% month over month and 31% year over year, according to ACT Research. They were 21% higher on a year-to-date basis compared to the same period in 2020.
Auction prices surge
Auction pricing for the newest-available sleeper tractors are bringing the highest pricing since J.D. Power Valuation Services began consistently tracking the segment in 2015, said Chris Visser, Power commercial truck vehicle analyst.
“Month over month, our benchmark group of 4-6 year-old trucks brought 21.9% more money. Compared to the first three months of 2020,” he said in Power’s monthly newsletter. “This group is running an amazing 72.5% ahead — and that’s still mostly a pre-COVID 2020 comparison.”
Two factors are driving new model used truck prices higher. First is a relative shortage. Some fleets poised to trade equipment after four or five years are holding off trucks because new trucks are on back order with delivery dates slipping into early 2022.
The second factor is that scarcity of new and late-model used Class 8 trucks is driving prices higher on auction lanes and in retail dealerships.
“The supply of used trucks across the whole nation is somewhat limited,” Rush told analysts on the company’s Q1 earnings call last Thursday. “So obviously, supply and demand has driven prices up.”
A few examples from Power’s monitoring of month-over-month Class 8 sleeper cab auction activity:
- Model year 2018: The $69,556 March average was $19,627, or 39.3% higher than February.
- Model year 2017: The $57,749 in March average was $8,671, or 17.1% higher than February.
- Model year 2016: The $40,639 in March average was $1,858, or 4.8% higher than February.
“We don’t expect another 39.3% increase in any month-over month results,” Visser said. “But we do expect the newest trucks in the marketplace to remain a sure bet into the summer.”
Model year 2014 and 2015 trucks were less in demand. Their prices from February to March fell 12.1% and 15.1%, respectively.
Big month for retail
At retail, most dealers had a big month in March, averaging 5.9 sales per dealership, 1.3 more trucks per rooftop than in February. It was the strongest sales rates since July 2014, Power reported, adding that dealership traffic should remain strong through the current quarter even amid the acute need for more trucks..
“It would appear as though dealers have quickly gotten comfortable with paying significantly more for trades than they were just a few months ago,” said Steve Tam, ACT vice president. “And while they may not like it, buyers realize that if they want a truck, it is going to cost more in today’s environment.
“Given where freight rates are, truckers are in a better position to afford more expensive used equipment.”
Newer pre-owned trucks led the way in March. The average sleeper tractor sold was 68 months old, had 458,197 miles and brought $57,489. Compared to February, this average sleeper was three months newer, had 8,774 or 2% more miles, and brought $3,102, or a 4.7%, higher price.
“We still think a higher returning supply of trades combined with a more historically typical freight environment could limit price appreciation somewhat in the second half of the year,” Visser said. “However, these fundamentals could be largely negated by continued new truck constraints and extremely strong consumer spending.”