Used truck prices should continue improving in the first half of the year, building on a strong second half of 2020, according to J.D. Power Valuation Services.
“Confidence in the freight market going forward was the main reason truckers bought new and late-model used equipment beginning midyear,” said Chris Visser, Power’s senior analyst and commercial vehicles product manager. “The freight remained healthy due to the macro shift to work-from-home and all the upheaval that entailed. That’s the environment we’re still in.”
Orders for new Class 8 tractors have exceeded 40,000 units in each of the past four months. This more than made up for the lack of available new trucks during the spring when most manufacturers shuttered assembly plants for six weeks during the first wave of the coronavirus pandemic.
“Late-model used trucks were most likely a substitute for unavailable new trucks in late spring and perhaps later,” Visser told FreightWaves. “At the same time, there was a glut of available trucks until late in the second quarter, so supply had to be reduced before pricing saw positive movement.”
By the numbers
The average sleeper tractor retailed in December was 5 years and 7 months old, had 455,420 miles and brought $48,650. Compared to December 2019, the average sleeper was four months newer, had 25,640 (5.3%) fewer miles and brought $1,339 (2.8%) more.
The average sleeper tractor sold at retail in calendar year 2020 was 5 years and 8 months old, three months newer than in 2019. It had 462,427 miles, 0.6% fewer miles than a year earlier and fetched 19.4% less at $43,321.
But the pricing environment in the second half improved dramatically. Average pricing was better than at any time since the first quarter of 2019. Calendar year pricing averaged just 3.5% lower than 2019 because of the second-half surge when late-model trucks sold for 23.9% above the second half of 2019.
Rising sales volume
Preliminary used Class 8 volumes — same dealer sales — rose 11% in December compared to November. For the year, they were up 25% compared to 2019, ACT Research reported. The typical dealership averaged 4.4 used truck sales a month in 2020 compared to 4.1 sales in 2019, Power reported.
Industrial auctioneer Ritchie Brothers reported U.S. tractor prices increased 8% in the fourth quarter compared to the October-December 2019 period.
“Conditions rebounded in the second half of 2020 with dealers retailing 5.0 trucks [a month] in that period vs. 4.0 in [the second half] of 2019,” Power reported. ”We start the new year on much better footing than a year ago.”
The first half of this year should feel similar to the second half of 2020, assuming unemployment remains stable or improves, and there are no major shocks to the economy, Visser said.
“In the second half, there should be an increase in [used truck] trades that should place downward pressure on pricing,” he said. “Auction pricing should come back down the other side of the arc in late spring due to supply.”
Trade-ins of newer Class 8 trucks with advanced driver assistance systems (ADAS) are less a purchase driver than the still-strong freight market, Visser said. Daimler Trucks North America recently said the first wave of 2018 and newer used Freightliner Cascadias with features like automatic emergency braking and forward collision warning will begin showing up this year.
“Individual used truck buyers will buy the newest truck they can get a loan on,” he said. “With 2018s selling for roughly $45,000 to $50,000 at auction, buyers with good credit can afford those trucks. For fleets, ADAS is very important due to the insurance incentive and reduced risk of accidents, so the newer the better for them.”