Contracting used truck market another sign of industry slowdown

(Image: Alan Adler/FreightWaves)

(Image: Alan Adler/FreightWaves)

Guest post by FreightWaves’ Alan Adler

The trucking industry’s technical recession is causing real-world impacts to the used truck market, where sales continue to fall and even sought-after low-mileage rigs are under pressure.

Preliminary used Class 8 same dealer sales fell 8 percent in June compared with May, according to ACT Research. Used truck sales were down 25 percent compared with the same month in 2018. For the first half of 2019, used truck sales are down 18 percent.

June was the third consecutive month-over-month decline and mirrors anemic orders of new trucks, which have declined for eight consecutive months on a year-over-year basis. Fleets ordered so many new trucks in 2018 that the backlog awaiting production is still north of 200,000 units, ACT estimates.

“Despite six months of declining freight, most carriers are just now coming to grips with the reality of their markets,” said Steve Tam, ACT Research vice president.

ACT said on July 11 that all the trucking economy metrics it tracks have declined for at least two consecutive quarters, which is the technical definition of a sector recession.

According to J.D. Power Valuation Services, used truck prices in May drifted lower month over month for five consecutive model years from 2012 to 2016.

Model year 2016: $36,500 average; $7,420 (-17.0 percent)

Model year 2015: $36,000 average; $8,380 (-18.9 percent)

Model year 2014: $28,750 average; $3,428 (-10.7 percent)

Model year 2013: $23,500 average; $1,300 (-5.2 percent)

Model year 2012: $18,750 average; $2,964 (-13.7 percent)

“Late-model, low-mileage sleepers are no longer in short supply, and trucks with average and higher mileage are oversupplied,” Chris Visser, J.D. Power commercial vehicles  senior analyst and product manager, told FreightWaves.

“After more than two years of accelerated economic expansion and record-breaking new truck orders, the national fleet of trucks finally reached and then exceeded the number needed to move the current volume of freight,” he said.

That is leading fleets to resume one-for-one replacement of trucks coming off four- or five-year leases.

Through April, fleets and other trucking companies kept those trucks in service. That led to fewer trucks available at auctions, which propped up prices. Some companies bypassed auctions to sell their used models online, Visser said.

With prices falling, fleets are returning to traditional auctions.

“The total nationwide fleet of trucks is probably about as big as it needs to be to handle current demand for freight,” Visser said. 

He expects mild-to-moderate trade-in volume in coming months with used truck prices continuing to fall.