The recent pullback in spot freight rates isn’t affecting the sky-high prices of used Class 8 trucks.
Some higher-mileage used models sold for less in March, but the undersupply of equipment shows no signs of easing.
“Any downward movement in the tender rejection rate since February hasn’t correlated to a change in used truck pricing,” Chris Visser, commercial vehicles senior analyst and product manager at J.D. Power Valuation Services, told FreightWaves.
Changes to market conditions usually show up at auctions first. Power said it is seeing an increased spread between auction and retail selling prices.
Used Class 8 auction volumes increase
Auction volume increased in March 2022, which Power said in its Guidelines newsletter is typical for the month. Trucks with average to low mileage continue to set records in auctions. For example, Ritchie Brothers said a 2020 Peterbilt 567 8×4 truck tractor sold for $242,500 at an auction in Houston.
Three- to 5-year-old trucks averaged 0.1% less money than February and 72.9% more money than in March 2021. Year over year, late-model trucks sold in Q1 2022 averaged 99% more money than the same period of 2021.
Pricing has been increasing for two full years, Visser said. Before Russia’s invasion of Ukraine, Power predicted a 10% year-over-year decline in pricing by the end of 2022. With the war, year-over-year comparisons could turn flat in the second half of this year.
During the last used truck market downturn in 2019, it took six to eight months for used truck pricing to go from peak to trough.
“Current pricing is more than 50% higher than the last pre-pandemic peak in 2018, so in a historical sense, even with some pullback, used truck pricing will remain elevated,” Visser said.
Semiconductor woes
The inflated prices for used trucks are linked to the shortage of semiconductors preventing manufacturers from completing new trucks. That has at least temporarily lengthened the trade cycle as fleets keep trucks on the road longer. Even getting higher prices for used equipment is little incentive to sell since the opportunity to replace with a new truck is limited.
“Because we have such a great maintenance program, our strategy continues to be to maintain and run trucks longer,” said Brent Nussbaum, CEO of Nussbaum Transportation, which does not purchase used trucks. “The only challenge with that strategy continues to be finding parts.”
If fleets are willing to accept new trucks with certain microchip functions disabled, the number of new trucks available could increase in coming months, Visser said. The war in Ukraine is impacting the supply of neon gas and other chemicals used in semiconductor manufacturing. That could further lengthen the availability of chips.
A year’s worth of retail price records
At retail, buyers continued to pay record-breaking prices for the few desirable trucks that became available in March. The average sleeper tractor retailed was 68 months old, had 461,001 miles and brought $117,791. Compared with February 2022, this average sleeper was identical in age, had 1.9% more miles and brought $7,105 (6.4%) more money.
Compared with March 2021, the average sleeper was identical in age, had 2,548 more miles and brought $60,300 (104.9%) more money. The average selling price figure has now set a record every month for a full year, Power said.
ACT Research reported preliminary used Class 8 retail volumes grew 23% in March over February as new truck deliveries ticked higher due to moderate improvement in supply chain disruptions. They were still 23% lower compared to March 2021.
“It almost goes without saying that the used truck industry is still plagued by demand greatly in excess of supply,” said Steve Tam, ACT vice president. “As a result, longer-term comparisons are more representative of current market conditions.”
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