The recovery in Class 8 used truck auction and retail sales paused in October. Individual purchases crept higher which could create a glut when tens of thousands of trucks and drivers sidelined because of the pandemic return to the roads.
Preliminary used Class 8 sales volumes fell 10% in October compared with September and were 12% below the same month a year ago. But they are 10% higher year to date compared to the first 10 months of 2019, according to ACT Research.
Average prices, miles and equipment age all rose in October compared to September. But year to date, all three were lower compared to the first 10 months of 2019.
Missing the big picture
Equipment demand hinges on the spot market where per-mile rates remain at or near record highs, said ACT vice president Steve Tam.
“One of the most frequent questions we are being asked today is why truckers are buying trucks when there are still tens of thousands of unemployed truck drivers, whose rigs are sitting idle,” “Tam said.
Drivers reactivating their authority to take advantage of the spot demand could be partially responsible for the next downturn arriving sooner.
“Buyers are probably unaware that they are individually contributing to a faster imbalance of too many trucks and not enough freight, which will hasten the next peak and send the industry down the backslope of the next cycle,” Tam said.
Tougher environment may return
Used truck prices rose in late summer and through September after more than a year of downward pressure. The climb from the abyss paused in October.
“The current COVID shutdowns and scale-backs are a very recent factor that may not have yet shown up in freight data,” J.D. Power Valuation Services Senior Analyst and Commercial Vehicles Product Manager Chris Visser told FreightWaves. “At this point, we’re not back to the widespread shutdowns of the spring. But in the very near term. it looks like we’re pivoting in that direction.”
The end of the Paycheck Protection Program (PPP) at year end and its impact on consumer spending could stall freight momentum.
“I would expect some degree of pullback in freight as a result,” he said. “But not on the level of April or May.
Not much to go on
Used truck activity in October was too weak to draw many conclusions about direction, Power said.
“The sales that did occur did not give us much to go on in terms of market analysis, particularly for the newest model years,” Visser said. “Pricing appeared stable following September’s healthy increase.”
Model year 2017: $36,500 average; $15,042 (29.2%) lower than September
Model year 2016: $33,500 average; $1,272 (3.9%) higher than September
Model year 2015: $25,000 average; $775 (3.0%) lower than September
Model year 2014: $21,850 average; $1,850 (9.3%) higher than September
Model year 2013: $14,050 average; $2,671 (18.2%) lower than September
The 2017 model year was an outlier because it is based on a very small sample of high-mileage trucks, Visser said.
Second half pricing holding up
Month-over-month, Power’s benchmark group of 4-6 year-old trucks brought 13.3% less money. In the first 10 months of 2020, pricing averaged 9.9% lower than the same period of 2019. However, pricing in the second half of 2020 is still running well ahead of 2019. The benchmark truck is bringing an average monthly price gain of 2.8% this year.
“I consider the auction channel to be a leading indicator of the used truck market,” Visser said. “There were fewer auctions in October. So therefore lower sales volume. Pricing was generally stable instead of upward. The fact that freight volume remained strong in October doesn’t have me concerned about the pause in appreciation.”