Over the past two years, we’ve frequently used the phrase, “fundamentals support high used truck pricing.” What specifically do we mean by this? Basically, we’re talking about supply and demand.

On the supply side, number of trucks entering the secondary market is a critical factor. We know from the new truck build rate that the 2008-2011 model years were built in historically low numbers. We can’t precisely predict the timing of trade-ins, but we do at least know that the potential pool of returning trucks will be lower than typical for at least another year. Also, we can survey dealers to determine inventory levels. Currently, dealers are reporting higher inventories, which are a logical result of the healthy sales (deliveries) of new trucks since the beginning of the year.

On the demand side, we’re mainly talking about industrial production and manufacturing. The Federal Reserve provides that data. The trucking recovery that began in late 2009 has been tied to manufacturing more than other measures. In a normal economy, consumer spending and housing would provide additional insight into potential demand (particularly for the medium-duty market), but those measures have lagged in this unusual period. As such, the slow but relatively steady upward movement in the manufacturing sector has driven our demand assumptions.

We are currently in an interesting period in which used truck pricing remains high despite a higher number of trucks entering the secondary market. We explore that topic in our latest GuideLines market update. As we stated, July’s results will be more critical than usual in determining the direction of the market. Stay tuned.