ACT Research's Tam says used market trough won't last forever

ACT Research's Steve Tam speaking at UTA convention
ACT Research Vice President Steve Tam speaking at 2023 Used Truck Association (UTA) Convention Thursday in San Antonio.

It’s going to get better in the used truck market in 2024. Eventually.

At least that’s how ACT Research anticipates the market evolving over the next 12 months, said Vice President Steve Tam Thursday during his annual presentation at the Used Truck Association (UTA) Convention in San Antonio.

After last year’s gloomy remarks and the continued softening of the market since, Tam tried to be positive where possible Thursday. Used truck prices keep falling and that’s not likely to reverse course soon, Tam said, but the trucking industry’s business cycle is nearing the end of its low point. There are indicators that freight volumes and rates will begin rising again next year and when that happens, it will eventually pull the new and used truck markets up as well.

“Everything right now seems to be poised at the bottom of the trough,” he said. “We think freight rates will begin to start rising again in the spring, first in the spot market, and beginning in the second quarter [data] will start to be positive in year over year assessments.”

Tam said ACT Research ties that prediction to a number of economic factors.

He said consumer spending and services are currently driving GDP growth, which is how U.S. third quarter numbers can be so strong while freight volumes stagnate. Tam said the U.S. Freight Composite Index is likely to close 2023 down 0.2% but rise by nearly 2.0% the following two years. He added the increase next year will be driven by business investment. As the economy gets further away from the pandemic recession and its inflationary recovery, interest rates will stabilize and businesses will have more confidence to invest.

ACT Research Classic Truckload cycleACT Research says the trucking industry follows a classic cycle and is currently approaching its trough as it bottoms out.

Tam also noted ACT Research expects fleets to stagger their new truck purchases in the coming years in order to pre-buy ahead of EPA 2027 regulations, which could lead to lower truck deliveries in 2024 before bigger years in 2025 and 2026.

Together, Tam said all of these factors should spur an uptick in used truck demand in the latter half of next year. He said ACT Research is predicting a 6% increase in volume next year with pricing bottoming out in the second quarter and slowly recovering afterward. The rate of growth, when it arrives, won’t equal the pace at which prices have fallen over the last 18 months, but will instead appear more in line with historical recovery rates. He also said the pace at which price continues to fall between then and now should decrease, as depreciation rates move closer to industry averages.

“We are forecasting stable prices in 2024, and ending the year stronger than we started,” he said.

But optimism for the latter half of 2024 doesn’t alleviate the industry’s ongoing strain.

Used truck volumes are up 26% year to date (YTD) but only 2% in the retail market as sellers have searched for the right channel to maximize prices in offloading excess inventory. 

[RELATED: J.D. Power says Class 8 depreciated remains higher than normal]

Tam said Class 8 sleepers are down 37% in price YTD through September. Day cabs (25%) and straight trucks (13%) haven’t been hit as hard but are still down. Price reductions in the medium- and light-duty markets haven’t been quite as severe, with the former down 19% YTD and the latter only down 7%. On that note, Tam mentioned those smaller vehicle segments can be a good buffer against extreme market volatility for used truck dealers since neither is exclusively tied to freight like the Class 8 space.

Yet he also again echoed in each segment price reductions have slowed but are not going to reverse course this year.

“Prices falling each month; demand is bottoming out,” he said.

Tam also tried to assuage concerns from the audience about the liquidation of Yellow’s assets after its bankruptcy. Tam said the liquidators of that equipment have up to 18 months to sell approximately 14,000 trucks and 45,000 trailers. He said ACT Research anticipates the liquators will take at least six months to sell the units and could take longer. He said right now they are accepting bids on the newest equipment and attempting to sell it privately. The older equipment they will likely move into the market in stages, analyzing how the first batch of units sell and then create a long-term dispersal strategy for the rest of the trucks and trailers.

“They’re not just going to dump them into the market in one day,” he said.

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