Mileage Rises, Prices Decline for Used Trucks, Analyst Says

This story appears in the Nov. 26 print edition of Transport Topics.

Used heavy-duty truck prices softened in October at the same time the average mileage of used tractors climbed to an all-time high, ACT Research said last week.

October was the second straight month that used truck prices declined from the corresponding month a year earlier, said ACT Vice President Steve Tam. Prior to September, prices had increased year-over-year for 30 consecutive months, he said.

The average price of a used Class 8 truck sold by retailers, wholesalers and auctioneers declined to $38,496 in October, down 3.5% from $39,874 in September, and 7.3% from $41,522 in October 2011, according to ACT’s preliminary figures.

The average mileage of a used truck sold in October was 570,570, “the highest we’ve seen since we started collecting used truck data,” said Tam, who described the rise in mileage as the main driver of the pricing decline. Average mileage was up from 559,901 in September and 533,166 in October 2011, he said.

“The used truck buyer is buying the remaining life in that truck, so if there’s less remaining life, he’s not going to pay as much for it, all other things being equal,” Tam said.

Despite the recent downturn, the average used truck price for the first 10 months of 2012 was $42,250, up 9% from the same timeframe last year.

Although new truck buyers have been holding on to their equipment for extended cycles, there are signs that they may begin to ramp up replacement, Tam said.

“The preliminary net-order numbers for October were very strong, so that suggests that it’s time to get the replacement ball rolling,” he said.

Truck makers received 23,200 new Class 8 orders in October, the highest total since January, ACT reported earlier this month (11-12, p. 1).

Tam said he wasn’t sure if October’s figure was the high-water mark for average mileage, “but we’ve got to be fairly close.”

American Truck Dealers did not yet have pricing data for October, but said the average retail price of a used Class 8 sleeper in September was $48,740, down from $49,627 in August and $49,049 in September 2011. ATD is a division of the National Automobile Dealers Association.

Chris Visser, senior analyst for ATD/NADA, said the pricing of used 2010 and 2011 models has depreciated the most.

“I think the market has finally put a bit of a ceiling on the newer model years as to what people are willing to pay,” Visser said. “The price just got high enough where people are either making the jump to new or deciding to live with an older tractor.”

ACT said the sellers it surveys sold 1,563 trucks in October on a same dealer basis. That total was up from 1,238 in September, but down from 1,766 in October 2011.

Year-to-date, those dealers have sold 15,434 used trucks in 2012, down from 18,065 in the same timeframe last year, ACT said.

Used truck dealers are still having a hard time moving 2008 and 2009 models, said Rick Clark, president of the Used Truck Association.

“Most people are looking at ’07s and ’10s,” he said. “Inventory hasn’t really flipped, and I don’t think dealers are writing them down, overall.”

Clark, who also is vice president of National Truck Protection, Cranford, N.J., said the mileage is “way up” on his customers’ trucks.

“We’re putting warranties on ’07s with 800,000 or 900,000 miles,” he said. “We see a spike in that, and it’s rare to see them in the 400,000s and 500,000s.”

Clark said he expects to see higher warranty sales, which mirror used truck sales, in areas where equipment was damaged by Superstorm Sandy.

“Once everyone gets their insurance taken care of, I would expect within the next couple weeks we’ll have a pretty large [sales] spike in the Northeast,” he said.

Louis Pinheiro, a salesman at the Arrow Truck Sales dealership in Elizabeth, N.J., said its used truck lot was spared by Sandy, and customer traffic jumped following the storm.

“Most of the guys who are coming into our store have flooded trucks,” he said. “It seems to be moving pretty quickly with the insurance adjusters getting to the trucks and telling these guys if it’s total loss or not.”

With the expectation of insurance money for the value of their damaged vehicles, these customers are looking to purchase used trucks and get back on the road.

“The problem we’re finding is that a lot of these guys are a little bit credit challenged due to the economy and everything else,” Pinheiro said. “Now they don’t have a truck and they have to go and try to get credit and it’s difficult to get them approved.”

The dealership also has a list of customers who are waiting to see if their insurance will total their trucks, he added.

Pinheiro said it’s “heart wrenching” to see some of the customers coming in, including many owner-operators. “They’re just looking to get back on the road as quickly as possible. They have a family to feed.”