As we noted last month, dealer-to-dealer wholesale sales steeply increased in July. We have also been tracking a moderate increase in trucks exported, although this activity is largely limited to a specific make and model. In addition, auction activity is higher in 2015 to date than last year. What are the factors behind this increased wholesale activity?

Fundamentally, the continued increase in new truck deliveries results in a commensurate increase in trades. These trades are typically cycled through auctions, which largely explains the higher activity in that channel.

Dealer-to-dealer wholesale trading generally happens for three reasons. First, a dealer might purchase specific trucks from a different dealer to meet a retail customer’s need. Second, a dealer may receive a large package of trades which is unfeasible to sell retail, so he sells some or all of these trucks to other dealers to avoid holding the trucks. Third, a dealer may accept wholesale pricing for aged inventory in order to remove that iron from his books. The increase in trades this year suggests the second scenario is most likely responsible for July’s higher figures.

Generally, increased dealer-to-dealer sales suggest a regional realignment of inventory, which can be an early indicator of a maturing market. Supply is increasing, and these trucks are distributed to where demand is greatest.

Stay tuned for further analysis in the September edition of Guidelines, available mid-month.