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 manufactures 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.
