Recently I’ve discussed how economic uncertainty has not negatively affected the prices buyers are paying for used Class 8 sleeper tractors. Market fundamentals should continue to support high pricing going forward. Here are two major reasons why.

First, we are still in the front end of a multiyear period of low returning supply of used trucks. The new truck build rate tells the story:

2008 model year: 212,000
2009 model year: 205,000
2010 model year: 118,000
2011 model year: 154,000

By comparison, the build rate of the 2005-2007 model years averaged 327,000 trucks per year.

How does this impact used trucks? If you assume the majority of owners trade their trucks after 3-6 years, the first of the 2008’s were traded in early 2010, and the last of the 2011’s will be traded in late 2015. That’s simple math. As such, the supply side of the equation is a known factor up through the next three years.

On the demand side, the market increased its appetite for late-model, low-mileage trucks in late 2009, as owners decided the economic recovery was underway and decided to replace their aged equipment. The lowest-mileage iron was snapped up first, resulting in a historically unusual scenario in which price and mileage of trucks sold increased in parallel (as opposed to the more logical inverse relationship between price and mileage). At present, the average price and mileage of trucks sold in the retail channel have leveled out at extremely high levels. The market has simply decided that given the high price of new trucks, a used truck – even one with over 500,000 miles – is an acceptable substitute. And the supply is dictating the price. See the graph below for detail.

This is of course a very general overview of major market factors. Overall, though, we are confident that nothing outside of a major contraction in the domestic economy will notably reduce demand for late-model, low- to average-mileage sleeper tractors. And we consider that scenario extremely unlikely.