Normalcy is returning to auction prices of used trucks, but the new normal for a rig with 400,000 to 550,000 miles is going to cost buyers about 20% more than before the COVID-19 pandemic.
That’s the forecast from J.D. Power Valuation Services, which tracks pre-owned truck prices in auctions and at retail dealerships.
“We expect auction pricing to hit a ‘soft floor’ before the end of the year, landing about 20% above the most recent pre-pandemic peak of early 2019,” said Chris Visser, who writes Power’s monthly Commercial Truck Guidelines newsletter.
Declining auction prices
Even as auction prices have declined in recent months, they are still 45% higher than before the pandemic.
In August, 3-to-6-year-old trucks sold for 8% less than July but 3.2% more than August 2021. Late-model trucks sold for 61% more money in the first eight months of 2022 compared to the same period in 2021 despite sleeper trucks depreciating 6.1% per month on average.
The higher baseline prices and availability of used Class 8 tractors and sleeper cabs is tied to intermittent slowdowns of new truck production because of supply shortages.
Manufacturers are holding the backlog of new trucks in check, filling orders at rates well below demand.
“I haven’t had an unsold [new] stock unit on my lot since January of 2021,” said Steve Bassett, president of General Truck Sales in Muncie, Indiana. “I don’t anticipate that to change for the next couple of years.”
That lack of new equipment forces fleets to hold onto their trucks longer, directly impacting the number used rigs available at auctions and dealerships.
Retail movements smaller
At retail, 3-to-5-year-old trucks sold for an average of 2.1% less money in August than July. Similarly aged trucks sold for 68.6% more money from January through August compared with the same eight months in 2021.
Depreciation is averaging 1.5% per month in 2022, substantially better than auction prices, Power said. Retail pricing for late-model trucks is more than 50% higher than the last pre-pandemic peak.
Yo-yo effect of new truck production
Retail sales of used trucks jumped 29% in August, more than expected, according to ACT Research. That increase is hard to call a trend, however. New truck production rose in June, allowing fleets to dispose of older rigs that reached used dealerships in August.
But new equipment production tailed off in July, suggesting September used truck sales will fall as well. It rebounded in August, hinting at better used availability and sales in October. The typical impact on used trucks comes about two months after new truck production.
“For what it is worth, that basic pattern also follows historical seasonality, though this year is likely to see higher highs and lower lows, given ongoing constraints.” said Steve Tam, ACT Research vice president.
In addition to month-over-month and year-over-year comparisons in used truck prices, Power increasingly compares pre-pandemic numbers to the most recent month. New truck prices increased substantially during the pandemic because of production shortfalls and the cost of expedited delivery of critical parts and components.
Relative stability in contract freight prices suggests continued strong demand for new trucks.
“This situation means buyers will continue to pay a premium for trucks with less than 400,000 miles, since that segment is the next best thing to a new truck,” Visser said.