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Forecast of Class 4-7 Truck Resale Market: Status Quo

September 2014, Work Truck - Feature

by Charles Pannunzio

Absent of any dramatic change in the economy, resale values for medium-duty trucks will continue the slight decline experienced earlier this year.

Ricky Beggs, senior vice president and editorial director of Black Book, said everything he is seeing points the status quo for buyers and sellers of used trucks.

“Of course, it’s always up in the air because you never know what’s going to happen going forward,” Beggs said. “But, just based on new orders, the volume of used trucks that are out there, and the activity that we see in the marketplace, we feel that depreciation levels will probably increase a little bit from what has been occurring.”

The average wholesale value of trucks in Classes 4-7 dropped 1 percent from July 1 to August 1, 2014, on the heels of a 1.1-percent dip from June to July, when the median value for trucks in model-years 2003 to 2010 was $17,446. The decline had been 0.7 percent between May and June.

“We think the level of depreciation for the rest of the year will be anywhere from 1 percent to 1.5 percent per month,” Beggs said. “And, that’s pretty much in line with what we saw the first half of the year.”

The wholesale value of the 2003-2010 model-year trucks took a big hit in the first quarter of 2014, with the median price falling from $18,879 to $18,016. The drop over the intervening four months has not been as steep.

“So, you’ve got a little bit of movement that says the market is a little softer than it was (in June), but when you look at three or four or five months before that, it’s actually a better market than it was then,” Beggs said.

Get More Life
Fleet managers are able to squeeze more life out of vehicles when the economy dictates, according to Beggs.

“They’ll hang on to them, they will get by with a slightly older truck, they’ll put a few more miles on the vehicle, and they’ll work it a little harder than they might normally,” he said. “Even though the economy has picked up a little bit, which has helped the market somewhat, there are still some doubts out there. Is the economy as good as some people want it to be?”

A flurry of new orders at the end of 2012 led to a dip in prices for used trucks. The month-over-month change was not nearly as dramatic in 2013 or the first half of 2014.

“And, that was a sign when the economy first made its turn, and things started to pick up a little bit and people just felt a little better. It was a case then that those trucks that they had been using had really gotten older,” Beggs said. “The industry was thinking, ‘You know what, we’ve got to replace some of these, we have a little bit of an uptick, let’s do it now.’”

That seems to be changing, Beggs said.

“Maybe that pent-up demand, that level of need has somewhat been met, so the market for orders has slowed down just a little bit,” he added.

One of the factors that makes the medium-duty truck market unique, especially in comparison to cars and light-duty vehicles, is that buyers are willing to cast a wider net to find what they want, Beggs said.
“Someone who is looking for a certain type truck can put in that criteria and spread out the mileage or the range they are willing to look, and they can find the vehicles that they are actually looking for,” he noted. “And, in this market, where you don’t have as many to choose from, then they are not afraid to travel, and to go to those areas to find it.”

Effects of Wear & Tear
A bigger factor in the cost and desirability of trucks in this class is how they are used, Beggs said.

Something that has not faced heavy industrial use “might have a tremendous amount of life left in it in relation to a five- or six-year-old truck that was used in an oil field, that was used in a mining operation,” Beggs said. “That buyer there might think ‘I can buy that five- or six-year-old truck that still has a tremendous amount of life in it because of how it was used, and put it in my oil field application and meet my needs.’ ”

Online sales are particularly attractive to buyers considering the distance they might have to travel to find what they are looking for, Beggs said.

“It is sight unseen as far as your eyes laying on it, but every one of these sales that they list vehicles online or they sell them online, or in conjunction with a physical sale, there is a pretty solid condition report that describes that vehicle,” he noted. “So, the confidence in the buyer is there because of that condition report, and it eliminates a little bit of that concern about sight unseen.” 

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