October Used-Truck Prices Rise on Low Mileage, Analysts Say
The Class 8 used-truck market in October saw mileage fall on vehicles and average pricing climb, according to industry analysts. But looking at conditions in November, other experts said prices have begun to fall as inventories mount.
Also, Class 8 used-truck registrations increased 10.5% in the third quarter from the year-earlier period, IHS Automotive said.
ACT Research said October’s data showed the average price of a Class 8 truck rose to $46,594, down 7% from $49,911 a year earlier but up about 4% from $44,965 in September.
The average price for all used Class 8s sold year-to-date through October was $47,346, up slightly from $47,080 in the first 10 months of 2014. The prices reflect sales across all channels — auction, retail and wholesale — and include all types of heavy-duty trucks, ACT said. It covers an estimated 10% of the market.
Steve Tam, an analyst with ACT, said one factor in the improved pricing in October was the decline in mileage on the used trucks sold that month.
“Miles have just continued to come down for about the past two years,” Tam told Transport Topics. “When you think about buying used trucks, you are basically buying what’s left in the life of the truck.”
Tam said the industry was continuing to compress trade-in cycles to switch to more fuel-efficient trucks as well as still feeling the effect on equipment utilization from the severe downturn of 2008-2010.
“We had a lot of trucks that were parked on the fence or not performing the normal amount of work. So I think we are working our way through the tail-end of those trucks,” he said.
Average truck mileage in October was 477,624, down 2% from 486,322 in September. It was down 11% from last October when it was 534,544 miles, Tam said.
The October’s average cumulative mileage for Class 8 trucks year-to-date was 496,578, down 9% from 543,169 in 2014, he said.
ACT conducts a sample of about 10% of industry outlets, including dealers, wholesalers and auctioneers, as well as a few large fleets to determine average prices.
Andrew Casey, an analyst with Wells Fargo Securities, wrote in a note to investors on Dec. 1 that trade-in values are eroding on used trucks, and there are a lot of them. “Dealers described a glut of used model year 2010-2014 with one dealer in Utah apparently holding approximately 1,800 trucks. November conditions appeared to modestly deteriorate from October with . . . used Class 8 sleeper cab truck price deterioration, down 20% to 25% in most regions.”
Meanwhile, the level of activity at auctions depends on whom you talk to.
Tam said there are “unsubstantiated rumors” that large fleets have been dumping equipment [through auctions] with really very little concern for values . . . afraid that they would get caught flatfooted” as prices fell faster.
ACT’s data could not confirm that, he said.
Nor could auctioneers he spoke with recently at a trade event, who “emphatically denied” that such a dump was occurring, Tam said.
However, Chris Visser, an analyst with the American Truck Dealers, maintained that in the late summer of 2015, inventory of certain popular models 3 to 5 years old began to be liquidated in greater numbers and for lower prices, mainly through one auction company.
“This particular outlet was chosen because it runs absolute, no reserve auctions, which is an efficient way to write off excess inventory if maximum pricing is not the priority,” he said. “This activity relaxed in September, but then ramped up even more in October.”
Craig Kendall, fleet account manager at The Pete Store in Knoxville, Tennessee, told TT, “Our salesmen are still working deals, selling trucks. There has been a little slowdown in freight. But it really shouldn’t surprise any of us that it has slowed. We have been on quite a run.”
He noted there are more trucks going to auction, and “we have seen used-truck prices come back some,” Kendall said.
“The auctions had pretty slim pickings on used trucks and trailers in 2013, certainly in 2014 and early 2015. As used-truck imports started to rise, dealers, fleets and end-users have started going back to the auctions because some of the wholesale markets have slowed down some, and some of the retail has slowed down some.”
IHS said registrations of used Class 8 trucks in the most recent quarter totaled 70,171, and represented 35.1% of the 199,917 of all used commercial vehicles registered in the period, down from 38% in 2014.
Class 8 used transactions have typically accounted for about 37% on a quarterly basis.
