Now is a Good Time to Talk About Used Truck Valuations
Now is a very good time to be talking about used truck valuations and the importance of being attuned to the characteristics of the used truck market.
When it comes to used truck valuations, it is good to look back at history. In June of 2020 there were about 40,000 Class 8 sleeper tractors advertised in the used truck market. There were so many that the whole industry was choking on them. They had been building up since early 2019 and continued into 2020.
Then COVID-19 hit.
The pandemic initially exasperated this market condition. By mid-year 2020 there was a real uptick in freight as well as a tremendous shift in the trucking industry for final mile delivery as everyone — especially consumers — started moving much of their purchasing online, and requesting delivery to residences increased the need for more trucks. In the Class 8 market, the number of available advertised trucks has gone from 40,000 last June to 16,000 today.
We saw new truck production and sales fall off in 2019, and during the initial phase of the pandemic many fleets started canceling orders. In addition, truck manufacturers started shutting down their plants. What we ended up with was very few new trucks being built, a surplus of used trucks, and then great gains in freight activity. Spot rates started to skyrocket to new highs. The result was a massive uptick in the sale of used trucks and an unprecedented sellers’ market.
As expected, the pricing for this much smaller supply of used trucks has shot up quickly alongside much higher demand. Fleets and dealers are getting as much as 50% better pricing for their units today than they were getting a year ago for the same model year truck with the same number of miles. As an example, a tractor that eight months ago sold for $30,000 can sell for up to $55,000 today.
It is easy for fleets to get caught up in the current hot used truck market and think used truck pricing will continue at this level. The reality is the used truck market fits the old supply and demand equation we all learned in our Economics 101 class.
We are in a very unique used truck market that will not last. It never does. Fleets will be best served by tuning into the nuances of the used truck market and being aware of what is going on with new truck sales (as well as what is happening in the general economy) so they do not suddenly find themselves with used trucks to sell that are no longer appreciating in value.
While it would be nice if the used truck market was more predictable, it has not been very predictable for the past 10 years. You can try to read the developing industry trends or you may considering partnering with a firm that understands the cycles of the used truck market and can help you with your remarketing efforts and prevent you leaving money on the table when the market suddenly improves, or worse, not downwardly adjusting your pricing when the market starts giving indications of getting soft. You can end up sitting on a lot of tough-to-sell equipment.