With new trucks finally hitting the fleet market en masse and dealers eager to get out from under excessive inventory by year end, the used truck market saw a large dip in price last month, J.D. Power reported recently in its January 2023 Commercial Truck Guidelines industry report.
In the auction space, volumes were up substantially as sellers worked to remove large groups of high mileage trucks. J.D. Power says the increase in volume led to the largest depreciation change in several months, even noting "our mileage adjustment probably does not adequately correct for this extreme mileage," adding its January 2023 data may not "necessarily reflect market conditions."
Looking at the most common 2- to 6-year-old trucks, J.D. Power says pricing in its benchmark model was as follows:
- Model year (MY) 2021: $129,650; $29,420 (18.5 percent) lower than November
- MY 2020: $91,368; $4,982 (5.2 percent) lower than November
- MY 2019: $64,545; $13,131 (16.9 percent) lower than November
- MY 2018: $45,113; $14,146 (23.9 percent) lower than November
- MY 2017: $34,759; $5,367 (13.4 percent) lower than November
The company says price for 3- to 6-year-old trucks fell 13.8 percent from December and 35.5 percent from December 2021. Late-model trucks sold in calendar year 2022 did average 25.5 percent more money than 2021, though most of those gains came in the first half of the year. In 2022, 3- to 6-year-old sleepers depreciated 4.8 percent per month on average, the company says.
"Selling price continues to depend heavily on mileage and specifications," J.D. Power states. "Trucks with under 400,000 miles are still holding strong. Trucks with mileage between 400,000 and about 550,000 are depreciating at a rate higher than historical average but still linear. Trucks with higher mileage are losing value more rapidly. Selling prices are still higher than the last pre-pandemic peak, but now only about 25 percent. At the peak of the pricing bubble, this figure hit 149 percent. Expect trucks to continue depreciating until pricing is closer to historical trend."
The retail market experienced a similar downswing last month.
Sales volumes were up — but lagged historical norms — pricing was dependent on vehicle spec's and conditions. "The freight environment may have stabilized, but potential buyers are still contending with higher interest rates and declining equity," J.D. Power states.
The company says the average sleeper tractor retailed in December was 73 months old, had 439,511 miles and brought $89,723. Compared with November, this average sleeper was identical in age, had 29,981 (6.4 percent) fewer miles, and brought $87 (0.1 percent) less money. Compared with December 2021, this average sleeper was identical in age, had 28,774 (6.1 percent) more miles, and brought $675 (0.7 percent) less money. The market has been negative year over year since November.
In the popular 2- to 6-year-old cohort pricing was:
- MY 2021: $149,727; $721 (0.5 percent) lower than November
- MY 2020: $111,591; $3,726 (3.2 percent) lower than November
- MY 2019: $94,487; $8,368 (8.1 percent) lower than November
- MY 2018: $74,616; $3,078 (4.0 percent) lower than November
- MY 2017: $60,741; $4,969 (7.6 percent) lower than November
The company says 3- to 5-year-old trucks were down 5.1 percent on price from November and down 4.3 percent from December 2021. Trucks in this age group did bring 46.5 percent more money in calendar year 2022 compared with 2021 but, again, those gains came in the first half of the year. J.D. Power states depreciation averaged 2.4 percent per month in 2022 and that figure increases to 3.6 percent if only the most recent six months are included.
Retail pricing for late-model trucks is now 22 percent higher than the last pre-pandemic peak. "This figure hit 82 percent at the height of the buying frenzy," the company says. "Selling prices will continue to adjust closer to historical norms."
From a volume perspective, the increase from 2.2 to 2.6 sales per rooftop was notable but still lags at roughly half of long-term industry averages. J.D. Power says buyers continue to adjust to new realities of declining equity and increasing interest rates.
Pricing generally fell in the medium-duty market as well.
J.D. Power states Class 3-4 cabovers averaged $18,541 in December. This figure was $1,398 (7.0 percent) lower than November, and $7,584 (29.0 percent) lower than December 2021. Average pricing for Class 4 conventionals was $29,978 in December, $4,378 (12.7 percent) lower than November but $1,588 (5.6 percent) higher than December 2021. Class 6 conventionals averaged $40,767 in December, $1,089 (2.7 percent) higher than November but $928 (2.2 percent) lower than December 2021.
The company says December was another step toward the market's overall correction from early 2022 records. It says Class 8 sleepers have now fallen to within 20 to 25 percent of pre-pandemic peaks. And the freight markets also continue to adjust back towards normality, with spot rates potentially finding a floor and contract rates slipping slightly but still healthy.
"In general, the supply of trucks will increase as the freight environment stabilizes or pulls back somewhat. Negative equity has been a challenging factor in recent months, and that situation will not improve in the near future. This is what the back end of a pricing bubble looks like," the company says.
For more information, and to read the entirety of this month’s report, please CLICK HERE.