COVID-19 crisis could weaken already unstable used market, J.D. Power reports

The Class 8 used truck market showed some life with volume gains in the auction market and milder retail deprecation last month, but J.D. Power says any positive traction from February could be washed away this month as the COVID-19 pandemic spreads across the globe, the company wrote Tuesday in its March 2020 Commercial Truck Guidelines industry report.

“All bets are now off thanks to COVID-19,” J.D. Power states in its market forecast. “We’ll have a clearer picture of the economic fallout after a few more weeks have passed and the infection rate is better known. However, many economic measures will look pretty bleak in the third quarter, and likely not fully return to pre-Coronavirus levels after catch-up activity shakes out towards the fourth quarter.”

February data showed the volume of 4- to 7 year-old trucks sold at auction was healthy in February, rebounding nicely from a typically low January. Pricing was generally slightly lower than January, but given the much higher volume, J.D. Power says it views February’s results as a positive.

Average auction pricing for February was as follows:

• Model year 2017: $35,036 average; $1,234 (3.4 percent) lower than January
• Model year 2016: $28,553 average; $1,113 (3.8 percent) lower than January
• Model year 2015: $21,292 average; $792 (3.9 percent) higher than January
• Model year 2014: $18,398 average; $1,852 (9.1 percent) lower than January
• Model year 2013: $13,012 average; $12 (0.1 percent) higher than January

J.D. Power says month over month its benchmark group of 4- to 6 year-old trucks brought 1.8 percent less money. In the first two months of 2020, pricing averaged 28.2 percent lower than the same period of 2019. Depreciation is averaging 1.8 percent per month so far this year, a welcome change from the greater than 3 percent the industry has become accustomed to seeing.

In the retail space, the company says “pricing came in better than expected in February. Any negative month-over-month averages were driven more by a mix of trucks with higher mileage than a real decline in value of individual trucks. As with the auction channel, we feel the market woke up in February. A mild winter combined with a temporary surge in freight demand were probable boosts.”

J.D. Power reports the average sleeper tractor retailed in February was 70 months old, had 464,568 miles, and brought $45,393. Compared to January, the average sleeper was 1 month newer, had 8,289 (1.8 percent) fewer miles, and brought $220 (0.5 percent) less money. Compared to February 2019, this average sleeper was 1 month older, had 5,960 (1.3 percent) more miles, and brought $10,424 (18.7 percent) less money.

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Among 2- to 5-year-old tractors, average pricing in February was as follows

• Model year 2019: $104,453; $4,892 (4.5 percent) lower than January
• Model year 2018: $88,561; $427 (0.5 percent) higher than January
• Model year 2017: $63,382; $60 (0.1 percent) higher than January
• Model year 2016: $44,792; $5,921 (11.3 percent) lower than January
• Model year 2015: $40,160; $1,838 (4.4 percent) lower than January

J.D. Power states late-model trucks brought 2.6 percent less money. In the first two months of 2020, pricing averaged 11.9 percent lower than the same period of 2019. The company adds depreciation is averaging 2.6 percent per month so far this year, notably better than the second half of 2019, and not far from what it considers “historically typical.”

Rooftop sales were 3.7 trucks per store, an increase of 0.1 units from January but 0.7 units below February 2019 totals.

J.D. Power says the Coronavirus outbreak has thrown a monkey wrench into every economic forecast.

“Until we get a better feel for the severity of the infection rate, the best we can do is speculate on the most likely scenario. With that in mind, widespread shutdowns and quarantines mean the broad economic pullback that has already started will continue through the next couple of months. When the pandemic starts to recede, probably in the third quarter, we should see some catch-up activity. Many measures will probably not return entirely to pre-Coronavirus levels.”

The company adds the medium-duty market was down nearly across the board, with only Class 6 tractors seeing any month over month improvements.

February’s average price for Class 3-4 cabovers was $12,049, $384 (3.1 percent) lower than January, and $4,770 (28.4 percent) lower than February 2019. Class 4 conventionals averaged $21,206, $3,649 (14.7 percent) lower than January, and $2,841 (15.5 percent) higher than February 2019. Class 6 conventional pricing averaged $23,363 in February, $1,510 (6.9 percent) higher than January, and $2,094 (8.2 percent) lower than February 2019.

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