A lower supply of new models meant a few folks who would have traditionally bought new look at and purhcased used. - Photo: Ritchie Bros.

A lower supply of new models meant a few folks who would have traditionally bought new look at and purhcased used.

Photo: Ritchie Bros.

The used truck industry over the past two quarters has been solid.  

“Much of the velocity was with Class 8 equipment; however, over the past three months, we have seen increased demand for medium-duty and vocational equipment in specific segments. Supplies of used trucks have shrunk dramatically over the past six months. The high demand that we see today is putting upward pressure on retail prices,” said Brian Daniels, director, sales and distribution for Daimler Trucks Remarketing.

Following increased depreciation seen from March through June, the wholesale market bounced back due to increased demand and low supply. 

“Over the past few months, we have seen an increase in demand for units in all classes as supply continues to decrease. Production numbers continue to improve across all OEMs and classes slowly; however, they cannot keep up with current demand. Both wholesale and retail pricing has increased; however, recent week-over-week transactions have indicated that the market has reached a plateau. A reduction in overall freight mixed with slowly increasing production numbers are helping add a bit of downward pressure to the overall market,” said Josh Giles, principal automotive analyst at Black Book. 

Some are heralding pickup trucks as one of the few success stories of the pandemic.  

“It seems that the parts of the country and the parts of the economy that have held up best are places and sectors that also need a lot of Class 1-7 trucks. To be more specific, the construction and distribution sectors of the economy, which rely heavily on work trucks, have held up better than other sectors such as travel and hospitality,” said Tom Kontos, chief economist for KAR Global.

Delivery of goods in short supply during the pandemic needed to be maintained and trucks were the primary means by which that happened. 

COVID-19 has boosted online sales and the need for trucks that can assist with the last-mile delivery segment.  - Photo: Daimler Trucks Remarketing

COVID-19 has boosted online sales and the need for trucks that can assist with the last-mile delivery segment. 

Photo: Daimler Trucks Remarketing

“Also, trucks provided ‘last-mile’ deliveries of goods ordered online by folks isolated in their homes. Moreover, places like Texas and the Southeast faced less restrictive periods of closure than other parts of the country, and these are places where trucks are particularly popular,” Kontos added.  

And many will agree that the used pickup truck market has a few differences compared to other vehicle segments. 

“Unlike the new vehicle market, where pickups account for roughly 20% of sales in 2020, the wholesale market sees pickups with just 12% share. Pickups are underrepresented in the total used market compared to the new vehicle market, as consumers who buy pickup trucks tend to keep them for a long time, leading to the share mismatch between the two markets,” said Zo Rahim, manager, Economic and Industry Insights for Cox Automotive.

This disparity could help explain how well pickup trucks are doing right now.

“Given the lower share of pickups that enter the used market, prices for used pickups perform pretty well. In September, used-pickup truck pricing was up 25.9% year-over-year compared to September 2019, thanks to consumer demand and seasonal strength, as the overall market was up just 15%. Used pickups have fared better this year than the overall used vehicle market. While the used market is down 11% this year through August, used pickup truck sales are only down 4%, suggesting stronger-than-average demand for these vehicles,” Rahim added.

Medium-duty and vocational equipment sales are largely dependent on the economy.  
  - Photo: The Pete Store

Medium-duty and vocational equipment sales are largely dependent on the economy.  
 

Photo: The Pete Store

Another factor to look at is well-appointed, expensive pickup trucks.

“These more expensive pickups have, in many ways, replaced the luxury sedans many higher-income individuals prefer for their transportation. These vehicles were in short supply as OEMs ceased production, and dealer inventories remain lean as production and distribution remain constrained. It’s little wonder then that wholesale values for light- and medium-duty trucks are through the roof. As supply comes back, prices may soften somewhat, but they should remain strong into 2021 and perhaps beyond,” Kontos said. 

The used truck market in 2020 has seen significant growth in overall volume and prices, compared to 2019. 

“Online shopping has grown exponentially this year due to COVID-19 lockdowns, resulting in more trucks in our auctions and on the road. We have seen a sharp uptick in prices for low-mileage units in our recent auctions. For example, 2016 Freightliners with 350,000-399,000-miles achieve approximately $14,000 more than they did in the first quarter of 2020. Unfortunately, low-mileage units are getting increasingly difficult to find, resulting in rising prices,” said Rob Slavin, senior valuation analyst for Ritchie Bros. 

One added impact on used truck prices today, according to Craig Kendall, general manager, Knoxville for The Pete Store, a member of the Used Truck Association (UTA): a better business climate than earlier in the year.

“COVID-19 forced many truck plants and suppliers to close and to lower production. This meant some customers who wanted and needed new trucks bought ‘nearly new’ or very late-model used trucks. With new trucks not available and in shorter supply, some customers might have bought new trucks bought used. As new truck production could not keep up with demand, fewer trucks were traded in, which reduced the supply of used trucks when used demand was increasing,” Kendall shared. 

New trucks are not getting cheaper, and there were, and are, some bargains in used trucks.  

“For customers needing trucks, sometimes used trucks are a cost-effective way to get trucks. Customers with a job or a specific need may not want to pay for a new truck since they may not have ‘enough’ work for the truck once the job or specific use of the truck is over. Used trucks may be a good fit for this,” Kendall said.

While in late 2019 and early 2020 all truck classes were typically following the same basic rises and falls in value, by the time mid 2020 arrived a large disparity started to be seen between heavy-duty, Class 8 units and light-duty trucks. The gap has closed slightly.  - Source: Black Book

While in late 2019 and early 2020 all truck classes were typically following the same basic rises and falls in value, by the time mid 2020 arrived a large disparity started to be seen between heavy-duty, Class 8 units and light-duty trucks. The gap has closed slightly. 

Source: Black Book

Forecast for Used Trucks in 2021

If any year can prove you cannot truly predict the future, 2020 has forced everyone to step back and review trends, old forecasts, and trajectories. As a public company, many cannot provide specific predictions for 2021, but here are a few best guesses. 

“A lot is depending on the status of COVID-19. Currently, the freight market is strong, and spot rates are up, so things are looking positive for the near future at the very least. We encourage people to download our monthly Market Trends summary report with pricing trends for truck tractors, vocational trucks, construction equipment, lifting & handling equipment, and more,” said Slavin of Ritchie Bros. 

Some people are predicting a strong year for used trucks in 2021.  

“Much of this potential strength will be due to the economy and how the economy performs. Generally, the outlook for freight is good — barring any major problems — COVID-19 getting much worse, the economy worsening, etc. Freight demand has improved and there is work for truckers and trucks to do. When the economy is better truck sales tend to be better,” added Kendall of The Pete Store. “If things ‘hold,’ 2021 should be a good year. If the economy worsens or there are other big and bad events, the economy will suffer and truck sales will decline. What I have seen, and what our customers are telling us, looks favorable.”

Medium-duty and vocational equipment sales are largely dependent on the economy.  

“Daimler Trucks North America is optimistic about economic opportunity in 2021, and we look forward to growing our market share of Class 6/7 truck sales. The used truck market for medium-duty and vocational trucks should remain quite competitive with high demand and low supply through the year,” said Daniels of Daimler Trucks Remarketing.

The best estimate for the remainder of the year is price stability. 

“For the remainder of the year prices will remain relatively stable as supply continues to be an issue. As supply returns to what the new norm will be, we expect to return to a more normal depreciation trend. We have all learned from the unfortunate events that have rocked this country and will likely be a bit more cautious moving forward. The market has shifted and an industry that began the year saturated with product with end with scarcity. I expect models to retain their values better over the next few years compared to the depreciation we’ve seen over the past few years,” said Giles of Black Book. 

New model-year (2018 and 2019) units also experienced a steep drop in mid-2020 after a relatively stable year (over-the-road trucks had a drop in mid- to late-2019) and after a significant jump in late 2020 have begun to level out once again. - Source: Black Book

New model-year (2018 and 2019) units also experienced a steep drop in mid-2020 after a relatively stable year (over-the-road trucks had a drop in mid- to late-2019) and after a significant jump in late 2020 have begun to level out once again.

Source: Black Book

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