The big collapse in the used truck market that many were predicting as a result of the high order volume of new trucks in 2018 hasn’t happened so far. But that doesn’t mean that some tough times are not coming.
Two speakers at the ACT Research biennial seminar in Columbus, Indiana, Brian Cotaof, vice president of national accounts at Daimler and Steve Tam, a vice president at ACT Research, gave separate presentations that showed a market under pressure but one that has yet to undergo the sort of disaster that some had predicted.
For example, Tam presented a slide showing ACT Research’s most recent data on used Class 8 sales in June, showing an average price that month 2 percent higher than in May and 6 percent more than June 2018. Year-to-date, prices are up 10 percent. That is occurring against a backdrop of average miles on a used Class 8 truck flat to down 2 percent from used truck sales in earlier periods.
Those numbers are less than in recent months, however. Tam showed a chart of the average sale price of a Class 8 used truck; late last year, the average sales price year-on-year was at times rising more than 15 percent.
Tam’s slides and statements noted that there was a “solid increase in 2018 used truck demand” that delayed any sort of increase in 2019 inventory. But now that it’s starting to occur, Tam said an average used truck price increase in 2018 of 10 percent was going to end up being flat for the full year 2019 and would be flat to down 5 percent in 2020.
Another factor driving the relative strength of the used truck market this year against the steady stream of new vehicles coming in the market, is the quality of the vehicles coming on to the market, Cota said.
“The vehicles being traded out today are all good trucks,” Cota said. “They are very reliable and fuel-efficient. They are highly desirable trucks.”
He noted that the used truck market has slowed in just the last few months. “The pre-owned vehicle market has a different feel than three months ago,” he said. In particular, monthly depreciation has picked up.
But Cota compared this slowdown to the one the industry went through in 2014 and 2015 and noted several differences.
In the past, used trucks could be secured cheaply and drivers could be seated with the prospect of racking up a lot of miles because the fleets buying the trucks would be using paper logs. “They were willing to run them because they could stretch the hours of service,” he said.
Smaller companies would have an advantage because they would be competing for talent with bigger companies that were more likely to be running electronic logging devices, Cota said. But that advantage will be gone by the end of the year when the automatic on-board recording device exemption disappears.
The trucks coming on to the market that have four or five years of wear on them are of a quality that “the business case is getting better for used trucks today,” Cota said. Automatic transmissions on a growing number of used vehicles means that manual shifting is one less skill that new drivers need to learn, aiding retention efforts, he said.
He went through a litany of other improvements that make used trucks viable for independent owner-operators to acquire them – better fuel mileage, collision mitigation systems and better maintenance records. As Cota noted, if you skip just one loss of two or three days per year of downtime because of that, it adds to the economics of buying and operating a used truck.
Still, the final bullet point in Tam’s presentation was “It’s going to get worse before it gets better.”