“Most segments of the used truck market are performing quite well, with widespread price appreciation,” says Chris Visser, J.D. Power Valuation Services commercial vehicles senior analyst and product manager. In the short term, and possibly longer, the fundamentals favor ongoing strength. We’ve been in the freight market recovery for more than a year, and there’s no sign of it slowing down.”
Used truck values have long been seen to be reasonable indications of:
- Market health as a whole
- The cycle of purchase and resale values
- Capacity of truckloads
A scarcity of drivers and equipment characterizes the contemporary freight business. However, unlike other recent freight cycles, it is also fueled by increasing freight demand.
The number of used trucks sold at auction has decreased by 82 percent in the last year.
According to the J.D. Power June 2021 report, the volume of used trucks sold at auction in the three to seven-year-old sleeper cab category has decreased by 82 percent year over year.
Carrier withdrawals from the business reached new highs in March and April of last year, shortly after the pandemic hit and demand fell. We witnessed the most considerable number of trucks hit the auction block in the previous decade just two months later.
In June 2020, the two major auction houses in the country had 1,054 trucks. This was a 36 percent increase over the previous high achieved in December 2019. After a year, the number of trucks has dropped to just 192.
“At this point, late-model sleeper auction pricing is higher than it has been in the six years we’ve been following our benchmark group,” Visser adds. “And retail pricing is higher than it has ever been in the 12 years since the Great Recession.”
At the auction, three-year-old Class 8 vehicles were sold for $90,548. This is a 95 percent gain year over year, with four-year-old trucks selling for $71,263 on average, up 121 percent. The most significant increases were seen in the five-year-old category, where prices increased by 128 percent to an average of $62,296 in June compared to the same month the previous year.
“The auction results in June were a study in contrasts, with lower-mileage trucks fetching astronomical sums and higher-mileage, rougher-condition trucks underwhelming due to adverse mileage and condition,” Visser adds.
What about the retail price of a used truck?
Due to ongoing truck production difficulties caused by labor and part shortages, many purchasers turn to the used vehicle market to expand their fleets. This is especially true for low-mileage trucks that have some remaining engine and powertrain warranties.
Late-model sleeper tractors are still in short supply after a full year of recovery in the freight markets, and pricing continues to impress. Late-model truck values increased by 1.9 percent in June compared to May, according to the J.D. Power June 2021 Commercial Truck Guidelines industry report. Late-model trucks were also ahead 20.9 percent in the first six months of 2021 compared to the same period in 2020 and 2.6 percent ahead of the same in 2019. According to the research, the average selling price of every sleeper truck sold is at its highest level since at least 2007.
What was the source of all these trucks?
According to the Federal Motor Carrier Safety Administration’s (FMCSA) Census File for June, the industry has added just over 200,000 new vehicles to the market in the last 12 months since the pandemic began in early April last year.
This reflects a 4.4 percent increase in truck capacity year over year, with owner-operators accounting for 25% of the rise. In reality, fleets of one to forty vehicles, which have more substantial exposure to the spot market than most other categories, accounted for 78 percent of trucks added in the previous year. These figures, however, may be slightly deceptive.
Under their initiative, a large number of leased owner-operators transitioned to the independent category. While the FMCSA has witnessed an increase in the number of trucks registered, this includes both new entrants and owner-operators transitioning from lease to independent status.
As new carriers enter the market to take advantage of large profit margins, record-high spot rates have played a significant role in driving up truck pricing.
New capacity has been added in the recent year, yet spot rates have remained stable at current levels. There has also been no hint of the customary rate drop after July 4th.
While new trucks are delayed at the manufacturing level, it’s safe to anticipate the sector will continue to build independent contractor capacity, keeping used truck values high and auction inventory levels low.
