Used Truck Prices Slump at Auctions, Analysts Say
A major auction of fleet-owned, model year 2012-2013 sleeper trucks in mid-September pulled in lower-than-expected prices and may have signaled the start of a market erosion, according to Chris Visser, an analyst with American Truck Dealers.
Prices on the trucks at the auction, which Visser declined to identify, fell 15% to 20% compared with month-earlier prices.
“The prices have shifted downward and more substantially than from August to September,” Visser said.
Once other dealers saw “this one fleet putting its trucks through the auction, they probably decided the time was good to get their trucks off the books and take any loss they expect to take as soon as possible,” Visser told Transport Topics on Oct. 22.
Because it happened later in the month, he said, data on used-truck sales for September didn’t reveal how much the market shifted.
“October’s data will be pivotal,” Visser said. “That will definitely tell the story of whether the rest of the wholesale market as well as the retail market has shifted downwards to match.”
Visser said the sleepers sold in the “low $50,000s” and that one auction has been selling 15 to 20 of the trucks per week. He also noted dealers have been sitting on higher levels of inventory than normal for a couple of months.
Steve Tam, ACT Research’s vice president, said his data showed a 22% decline in prices at auctions month-over-month from August to September. Tam said the booming sales of new sleeper tractors are sending used sleepers into the resale marketplace in higher numbers, creating an “excess of inventory and driving down prices.”
Tam said that, in the last quarter of 2013, the industry was at parity between the amount of equipment to haul freight and the freight available.
“So that started putting pressure on capacity,” he said, which pushed up rates and profits.
Fast-forward about 18 months, and as freight slows, then rates and profits “roll over,” Tam said, describing a slippage in fleets’ net profit margins.
CEO David Jackson of Knight Transportation, No. 31 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, said during a conference call in October about third-quarter earnings that the used-truck market has softened over the past two months.
Jackson said that softening trend might be “the best evidence so far that capacity additions have peaked particularly for the smaller guy, and so that market was flooded.”
He added, “It will be interesting to see how quickly those trucks go away. When you combine the strong rates with the decline in fuel prices, I mean, it was quite a juicy invitation for a small guy to go add three or four trucks, and three or four trucks on a 15-truck fleet is pretty significant percentage-wise.”
Truckload carrier Werner Enterprises, No. 16 on the for-hire TT100, said in its most recent earnings report that it sold more trucks than in the third quarter of 2014 but realized “lower average gains per truck.”
Chairman and CEO W.M. “Rusty” Rush of Rush Enterprises, the nation’s largest publicly traded truck dealer, said heavy-duty trucks from 2009 to 2012 are entering the used-truck market in larger numbers.
“So it will be as much supply-side driven as it will be demand-side driven from our perspective, so I don’t think there’s any way that we don’t have softening, and we’re already seeing some softening in used-truck values as we speak,” Rush said.
