What will tame used truck prices? Apparently not even an economic slowdown

Rising interest rates and the potential for a slowing economy so far have no effect on runaway used truck prices.

“The February data is the last we will have that does not reflect any effects of the Russian-Ukrainian war,” wrote Chris Visser, principal analyst at JD Power Valuation Services, in the company’s March Guidelines report. “Prices in February continued to break records and, as of this writing in mid-March, there does not yet appear to be a wartime effect.”

The first of seven expected quarter-point interest rate hikes approved by the Federal Reserve on Wednesday also would not have affected used truck auctions and retail sales in February. .

What made the difference was a strong month of new truck sales in December. This led to fleets that retained older trucks putting them up for auction, albeit later in life than usual.

Canadian auction house Ritchie Brothers estimated that for the three months to February, prices for used truck tractors were up 63% from the same period a year ago.

“A large number of 2020 model year trucks sold this month, which could be a one month anomaly resulting from surprisingly high new truck deliveries in December 2021,” Visser wrote. Auction prices fell slightly from all-time highs as 2019 models showed up with higher mileage than usual, the effect of staying in service longer.

Unbalanced new-used relationship

“In today’s environment, used truck pricing is primarily determined by the relationship between the very hot freight market and the very insufficient supply of sit-down trucks,” he told FreightWaves. “Demand for new trucks is exploding, even though they are the most expensive ever, so MSRP is not a primary factor pushing buyers into used trucks.”

But if the market were to reverse – which is unlikely in the short term – “the price of used trucks would fall, regardless of the price of new trucks. So I would say that the relationship between new truck prices and used is low at the moment. »

When new technologies or regulations such as California’s tougher 2024 greenhouse gas emission standards arrive, the market often shifts into a “pre-purchase” mode, scooping up current products to avoid higher prices. in the next model year. With current backlogs and pent-up demand for new trucks estimated at 100,000 units, even that scenario is in question.

“In more typical times, if an upcoming price increase and/or technology change is significant enough, buyers will increasingly seek out low-mileage used equipment instead of new to avoid the increase or technology,” Visser said.

Soaring retail prices

At retail, the average sleeper tractor sold for $110,686 in February, was 69 months old and had 452,369 miles on the odometer. Retail prices for each model year from 2017 to 2021 increased in February.

Three- to five-year-old trucks sold an average of 6% more in February than in January. Trucks in this age group made 77.6% more money in the first two months of 2022 compared to the same period of 2021.

Preliminary Class 8 used retail volumes — sales from the same dealership — were up 20% month-over-month, but were 14% lower than February 2021, according to ACT Research.

“It’s clear that demand for used equipment remains robust,” said Steve Tam, vice president of ACT Research. “Either way, stocks are still scarce, so longer-term comparisons continue to be unfavorable.”

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