Used trucks, which a year ago approached unheard of auction and retail prices, have crashed to earth. Soft spot market rates, practically unfettered new truck production and drivers giving up their authorities are all factors.
Some fleets and dealers saw the reversal coming. After months of carefully controlled order intake for new trucks, manufacturers opened order books to new bookings. Carriers running their trucks beyond the typical three- to four-year trade-in cycle could plan replacement purchases.
Paccar Inc., the parent of Peterbilt, Kenworth and Europe’s DAF Trucks, expects to deliver 51,000 to 54,000 new units this quarter, which ends June 30. Some supply constraints remain but “generally improving circumstances” are expected as the year progresses, Paccar CEO Preston Feight said on an earnings call April 25.
That availability of trucks means more used trucks are being offloaded. And that pushes down prices.
“There’s been heavy depreciation for the meat of the market since the second quarter of 2022,” Chris Visser, director of specialty vehicles at J.D. Power Valuation Services, told FreightWaves.
“Dealers have adapted to depreciation in the sense that the smarter ones saw the market shift happening and did their best to get out from under their high-valued inventory before it went upside down,” he said. “Bids on incoming trades also became more conservative.”
More new trucks built means more used trucks pushed to resale
The build rate and backlog of new trucks waiting to be produced are messing with used truck prices.
“Clearly, weak freight volumes and rates coupled with new vehicle sales that are pumping supply into the used market are not the combination of factors required to support used vehicle prices,” Kenny Vieth, president and senior analyst at ACT Research, told FreightWaves.
Power’s latest data for used Class 8 trucks showed April-over-March auction prices falling between 2.1% and 11% for its benchmark 3- to 7-year-old truck.
Only 2021 models bucked that trend, rising 17.2%, or $15,000, in April compared to March. But Visser was quick to point out that small volumes of available trucks can skew the comparisons.
Late-model trucks sold for 8% less in April than March and 48.5% less than April 2022. In the first four months of 2023, late-model sleepers brought 47% less than a year earlier. Monthly depreciation in 2023 is currently averaging 5.8%.
Since March, Visser said, Power has seen a swell of trucks going to the used market “relatively easily identified as being from at least one large fleet. Those trucks are certainly a factor in the pricing downturn.”
Used truck prices slightly better at retail than auctions
At retail, 3- to 5-year-old truck prices in April registered slightly below March but 35.2% less than April a year ago. For the first four months of 2023, prices are down 28%. An exception is late-model sleepers, which command about 19% more than 2018, the last strong pre-pandemic year. Daycabs are holding their own.
Preliminary Class 8 same dealer used truck retail prices fell 22% in April compared to March, according to ACT Research.
So, in most instances, it’s a good time to buy a used truck — unless you’ve already surrendered your Department of Transportation authority because spot rates for freight are about $2 per mile less than a year ago, or you cannot qualify for financing in a tight credit market.
Depreciation likely will continue for an uncertain period of time.
“The only timing being done is trying to predict when depreciation might start to flatten out,” Visser said. “New truck availability hasn’t been a problem for at least two quarters, and the number of trucks on the road has been greater than the freight market demanded for over a year. Depreciation upwards of 6% per month is an oversupplied market.”
Typical used truck depreciation is about 2% a month.