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Used Class 8 trucks in October notched the first monthly year-over-year increase in average price after 17 such declines, ACT Research reported. It expects the gains to continue into next year.
The price was $41,812, up 8% compared with $38,743 in the 2019 period, according to ACT.
A year earlier, there were too many trucks for the amount of freight being hauled.
“That’s what was driving prices down and sending a larger number of trucks into the secondary market,” ACT Vice President Steve Tam said.
This year it’s the reverse.
Tam
“It’s ‘arguably strained’ capacity and freight is doing quite well,” he said. “So it’s turned the tide and pricing is going the opposite direction.”
Each month, ACT surveys a sample of dealers, wholesalers and auctioneers as well as a few large fleets to determine average price, age and mileage, and estimated industry volumes.
The age of the average Class 8 sold in October was 6 years, 6 months, down from 6 years, 9 months, a year earlier. Mileage fell to 450,000 compared with 477,000 in the 2019 period.
Sales in October were flat at 21,100 compared with a year ago.
Year-to date sales climbed to 204,800 compared with 197,400 in 2019.
“Record high spot rates are very seductive [motivations],” Tam said.
Despite the spot market’s strength, one factor weighing on sales volumes is bank financing that is getting harder to secure as the institutions turn a little more conservative, he said.
“[Banks] are looking at how quickly folks have taken advantage of the opportunity,” Tam said, “and wondering the same things we are: Where is the next peak, and when will things start slowing down?”
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One Southern California used truck dealer executive said the majority of those seeking financing for trucks he sells are owner-operators.
“Owner-operators account for two-thirds of all applications for new loans,” said Artemio Benitez, president of Portside Truck Sales in Torrance, Calif. “Furthermore, the other one-third are first-time buyers of which a majority of them are previous applicants who were denied loans and have come back to try again. The issue now, or better yet still, is banks are holding back more these past two months [compared with July and August].”
Another factor affecting sales negatively is the recharged pandemic, Benitez said.
“Between July and August, we calculated a 33% increase in sales over the first half of the year,” he said. “September and October were more reflective of the current situation with COVID-19 as sales were way down.”
In a Nov. 19 briefing, Dr. Henry Walke, incident manager for the Center for Disease Control and Prevention’s COVID-19 response, said cases, hospitalization and deaths are continuing to rise. “COVID-19 is turning out to be a formidable foe,” he said.
Ritchie Bros., a large seller of used trucks and equipment, said the persistence of COVID-19 forced it to turn entirely to online auctions.
“Despite the pandemic,” the company said in a statement, “online bidder attendance and selling prices are strong across the board.”
Ritchie Bros. suggested buyers may want to make purchases now to take advantage of the tax breaks available in Section 179 of the U.S. Tax Code that lets businesses deduct the full purchase price of qualifying equipment within the year it’s purchased instead of writing off small amounts over many years.
The deduction limit remains $1 million for 2020. It applies to the purchase of used equipment, too, the Vancouver, British Columbia-based company noted.
Tam sees Section 179 as something affecting the timing of a purchase more than stimulating new demand.
Benitez
At the same time, he said Ritchie Bros. is changing the perceptions of auctions.
“They are very aggressively marketing auctions as an alternative to retail [sales],” Tam said, “and so trying to bring younger equipment with lower miles to their auctions, working directly with fleets to do this. And all reports, having some pretty good results.”
Benitez noted trucks he purchased from major wholesalers in March and April rose by almost $10,000, or 33%, within 90 days. “Auction pricing followed suit right along with the wholesale market. I mention the auction prices because I really don’t see them as a good barometer of the wholesale market, as I’ve noticed that roughly 70% of their customers are retail end-users looking to cut out the dealers.”
He added auction prices remain high.
Tam said the data from auctioneers ACT follows showed pricing in October was up 18% compared with a year earlier.
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