J.D. Power says pricing beginning to slip as coronavirus hits used truck market

Pricing began to fall across the board in used truck spaces during the second half of March as the COVID-19 coronavirus pandemic took root in the United States, J.D. Power reported Wednesday in its April 2020 Commercial Truck Guidelines industry report.

In the auction channel, J.D. Power reports last month’s volume was higher than expected, considering the circumstances, with prices holding steady for most of the month before slipping near the end. Additionally, “pricing gap between lower mileage and higher mileage trucks is a wide as it’s ever been.”

Average auction pricing last month was as follows:

  • Model year 2017: $35,400 average; $364 (1.0 percent) higher than February
  • Model year 2016: $27,150 average; $1,403 (4.9 percent) lower than February
  • Model year 2015: $21,292 average; $708 (3.3 percent) higher than February
  • Model year 2014: $16,500 average; $1,898 (10.3 percent) lower than February
  • Model year 2013: $12,975 average; $37 (0.3 percent) lower than February

04.20.JD Power used trucksJ.D. Power says compared to April, 4- to 6-year-old trucks at auction brought 0.4 percent less money in March. Yet despite that appearance of stability, the company says auction pricing for that cohort is down 26.3 percent compared to the first three months of 2019.

“With consumers stockpiling certain items in March, the environment for dry van and reefer haulers was healthy. This activity kept used truck replacement demand stable,” the company says. “In April, the freight environment has pulled back from the surge, making our short-term outlook bearish.”

That bearish outlook was more tangible in the retail market, where equipment is losing value fairly rapidly.

J.D. Power states the average sleeper tractor retailed in March was 69 months old, had 454,887 miles, and brought $44,342. Compared to February, the average sleeper was 1 month newer, had 4,676 (1.0 percent) fewer miles, and brought $1,051 (2.3 percent) less money. Compared to last March, this average sleeper was identical in age, had 12,434 (2.7 percent) fewer miles, and brought $11,462 (20.5 percent) less money.

The company adds that drop in average pricing can be seen across multiple model years:

  • Model year 2019: $105,441; $988 (0.9 percent) higher than February
  • Model year 2018: $83,484; $4,889 (5.5 percent) lower than February
  • Model year 2017: $60,076; $3,719 (5.8 percent) lower than February
  • Model year 2016: $42,255; $2,537 (5.7 percent) lower than February
  • Model year 2015: $40,160; $1,838 (4.4 percent) lower than February

Compared to February, J.D. Power says these trucks brought 5.7 percent less money; pricing also is down 11.3 percent through March compared to the same three months in 2019. Depreciation has picked up as well. J.D. Power says it climbed to 2.7 percent last month and “will have undoubtedly increased by the time you read this.”

04.20.JD Power used trucks 2Dealer sales per rooftop in March were identical to February’s 3.7 unit total, nearly one truck below the same point last March. These low numbers are similar to the same dealer sales totals released by ACT Research Tuesday.

Volume and pricing also slipped in the medium-duty space, a somewhat surprising developing considering the growth in e-commerce since the start of the pandemic.

The average March price for Class 3-4 cabovers was $10,638, $1,411 (11.7 percent) lower than February, and $4,306 (28.8 percent) lower than March 2019. Class 4 conventionals averaged $17,803, $3,403 (16.0 percent) lower than February, and $2,121 (10.6 percent) lower than March 2019. And in the Class 6 space, conventional pricing averaged $21,572 in March, $2,580 (10.7 percent) lower than February, and $8,633 (28.6 percent) lower than March 2019. J.D. Power says the three segments are seeing depreciation levels of 5.2 percent, 9.9 percent and 12.4 percent, respectively, through March.

As it looks ahead, J.D. Power states used equipment pricing in the second half of March and especially the first week of April declined sharply from earlier periods.

“This should surprise no one. We took a relatively conservative approach to devaluation in our published values, but even still some trucks saw declines of up to 20 percent from March to April,” the company states. “Even this appears to have been light in some cases, so our April wholesale values may be higher than current auction results for selected trucks. We are of course watching pricing very closely and making updates as frequently as our systems allow.”

J.D. Power says used truck pricing should recover roughly in step with the gradual re-opening of the economy, with recoveries expected to begin in the late summer or Q3 and last into 2021.

“March made it clear to every American how critical the trucking industry is to keeping the country supplied. Volume and pricing at auctions earlier in March were in line with relatively strong freight data. At the time of this writing, most freight measures had contracted back to pre-surge levels and then some,” J.D. Power states. “We expect this factor to apply additional downward pressure to used truck demand.”

The company adds, “As we exit the shutdown period, watch unemployment figures. Most analysts predict a peak in the teens to the low-20 percent range in the short term. This historic spike will of course be short-lived, and come down relatively quickly as the economy re-opens. But we’re not going to return to the record-low 3.5 percent figure anytime soon.”

For more information, and to read the entirety of this month’s report, please CLICK HERE.

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