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Why the used trucks pricing bubble finally burst

After leaking for several months, the air is nearly evacuated from the used truck pricing bubble as increased production of new trucks allows fleets to finally trade their aging iron.

Prices at auction are about 25% higher than the last pre-pandemic peak, according to J.D. Power Valuation Services. At the peak of the pricing bubble, used trucks sold for as much as149% more than they did before COVID hit in March 2020.

The depreciation grew heavier in December. A lot of auctions and sellers looking to adjust their inventory for tax reasons at the end of the year contributed. But so did the highest new truck deliveries on record for any December, according to Ward’s Intelligence.

New truck deliveries pushed used truck prices lower

New truck sales rose 18% to 29,172 compared with 24,716 a year earlier, swamping the 23,581 sold in August, which had been the peak for the year. They also were the highest since data collection began in 1998. Full-year sales rose 14.6% to 254,206 compared with 221,889 in 2021.

“December’s record new truck delivery rate was partially responsible for strong auction volume and weaker pricing,” Chris Visser, J.D. Power director of specialty vehicles, told FreightWaves. “Trades typically take at least a few weeks to turn around, so new truck deliveries weren’t entirely responsible.”

Improving supply chains means more new truck production

Supply chain improvements are helping OEMs produce more trucks. That means more trades and a greater supply, if not oversupply, of used trucks.

“One way I define ‘oversupply’ is if pricing for late-model trucks dips below long-term trend,” Visser said. “Late-model trucks are currently bringing about 20% more money than the last pre-pandemic peak, and trucks with under 400,000 miles have barely depreciated at all. 

“If the freight environment holds up and OEM’s manage the build rate, we could avoid a used truck oversupply.”

Owner-operators and fleets that purchased used trucks at their peak are now stuck with overpriced equipment in the face of slowing freight rates. Spot market prices covering about 15% of loads have reversed, bringing scaldingly high per-mile rates back to earth.

Like the inflated used truck prices during a period of scarcity, many truckers who activated authorities to chase record high per-mile rates have returned to the sidelines, either quitting the trucking business or going to work at for-hire carriers.

Recent model used trucks fare better in price

Recent model used trucks with low mileage continue to perform better than older equipment with higher miles, Power said in its January Guidelines newsletter.

“It is safe to say trucks with average mileage lost at least 5% of value in December from November,” Guidelines reported.

Month-over-month prices receded from 5.2% to 23.9% for the five model years — 2017-2021 — that Power tracks. In December, 3- to 6-year-old sleeper cabs sold for an average 13.8% less than November and 35.5% less money than December 2021.

For the year, those trucks depreciated 4.8% every month on average. A 3-year-old truck that sold more than $160,000 in a January auction brought less than $100,000 in December.

Late-model trucks sold in calendar year 2022 averaged 25.5% more money than 2021, although monthly comparisons turned negative in the third quarter. 

Retail used truck prices lower than historic norms

At retail, sales volume moved slightly in December but remained lower than historic norms. A truck’s specs, mileage and the availability of similar makes and models all impacted prices asked and realized. A slower freight market, higher interest rates and declining equity combined to keep retail prices basically flat versus November.

The average sleeper tractor retailed in December was 73 months old, had 439,511 miles and brought $89,723. It was identical in age to the same truck offered in November except it had 6.4% fewer miles and sold for $87 less money. In December 2021, the average sleeper of the same age had 6.1% more miles and sold for $675 less. 

Preliminary used Class 8 retail volumes by the same dealers rose 20% in December over November but they fell 25% compared to December 2021, according to ACT Research. That’s more than three times the typical growth rate.

“Despite all of the downside projections floating around today, there is still solid demand for used trucks of all vintages,” said Steve Tam , ACT Research vice president. 

ACT Research and J.D. Power agree that used trucks will be in greater supply in coming months.

“Negative equity has been a challenging factor in recent months, and that situation will not improve in the near future,” Power said. “This is what the back end of a pricing bubble looks like.” 

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Used truck prices fall further in August with ‘soft floor’ in sight

Click for more FreightWaves articles by Alan Adler.