Wholesale Sleeper Market Continues to be Defined by Mileage

Mileage continues to be the determining factor in the wholesale selling price of a sleeper tractor. Specifically, 650,000 miles appears to be the point at which a truck loses value dramatically, as the graph below illustrates. Since January, 2011, trucks with under 650K have averaged $35,220, while those with over 650K have averaged $27,374. For this period, the negative correlation between price and mileage has been a statistically strong -0.88%. Interestingly, our data indicates that trucks with over 650K are making up an increasing share of the wholesale market. As the graph illustrates, the proportion of trucks with over 650K had been decreasing in late 2011, but rebounded steeply in early 2012.   One likely reason for this shift is the influx of trade-ins resulting from the increasing number of new truck sales during this period. Since the overall volume of sleeper tractors sold has remained roughly constant, this trend is further evidence that higher-mileage trucks are becoming the onl ...

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Owner-Operator Trucks Still Bring a Premium

A few months ago, we looked at the price difference in the retail market for aerodynamic vs. traditionally-styled sleeper tractors. We found that owner-operator trucks were still commanding a premium despite the importance of fuel economy. That trend holds true through the current period. The graphs below trace average selling price, average mileage, and average age of the two types of trucks. As the graphs suggest, the typical owner-operator truck found on a dealer’s lot is slightly older with higher mileage than its aerodynamic counterpart. Despite this, for 2012 to date, traditionally-styled sleeper tractors have averaged over $4000 more than aerodynamic trucks after adjusting for specs. The price decline from September, 2011 to March, 2012 is due to corresponding increases in average mileage and age. That trend reversed for April. It is likely that the increased versatility of a traditionally-styled truck (removable sleeper, set-forward axle, etc.) increases its appeal to potential buyers in the use ...

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New Truck Orders Fall Below Sales

FTR Associates reports that April new truck orders fell for the fourth month in a row, to 13,200 units. This result is notable because it is the first month since July, 2010 in which orders were lower than sales.   Due to the varied nature of new truck delivery schedules, as well as fungible dealer inventory levels, the order rate really has no statistical relationship to the sales rate. As such, we cannot make any definitive predictions based on these two factors. However, a multi-month downward trend in orders suggests a decrease in demand. At the same time, keep in mind that the summer months have historically been a slow period for orders (although the recession and multiple pre-buy periods of the past decade have made this observation somewhat unreliable). Also, as stated, dealer inventory could be on the rise, so there’s not much reason to expect sales to drop dramatically. A rise in inventory could mean increased incentives on new trucks, but at this point the gap between new and used pricin ...

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Used Truck Pricing Stays the Course

Despite mixed word of mouth, the data provided to us by dealers and OEM’s is not providing much reason for pessimism. With about 70% of our April retail sales data received, we are projecting a minor decrease in average selling price of sleeper tractors due to a proportional increase in average mileage. Specifically, expect April’s average price to decrease about 4% due to an average mileage increase of about the same amount. Average mileage has hovered around the 550,000 mark since the end of 2011, and selling price rises and falls based on proximity to that point. This behavior is logical, since 550,000 miles is the point at which most trucks are due for an overhaul if they haven’t already had one. Average selling prices are clearly higher than they were this time last year, despite substantially higher mileage. Price has leveled out at around $47,000 for trucks with just under 550,000 miles. With pricing stabilized at this historically high level, a guaranteed lean returning supply of used trucks ...

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New Truck Buyers Remain Cautious

WardsAuto reports (subscription required) that April Class 8 sales numbered 16,905, which is only about 500 sales off the four-year-high set in October of last year.   However, based on the monthly declines in orders in 2012, we can expect a flat to downward trend in sales in the 2nd to 3rd quarter. FTR Associates’ TruckGuage reports (subscription required) that the story behind declining orders is that an unusually high number of these trucks were for immediate delivery and delivery in the 3rd quarter, essentially skipping the 2nd quarter. In addition, the order cancellation rate increased from 6.1% to 9.0% in March, reducing our optimism. Fundamentally, the domestic economy is not providing any real reason for concern. The manufacturing and natural resources sectors that have driven the rebound in trucking continue their upward trends (although a shift away from natural gas fracking may negatively impact regional construction and transport activity). Consumer spending has steadily increase ...

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May Commercial Truck Guidelines Are Available for Download!

The May editon of NADA Used Car Guide's Commercial Truck Guidelines is available for you to download. Look for highlights on high Class 8 pricing and volume, with used sleeper tractor pricing remaining at a high level despite ever-increasing mileage.

High Used Truck Prices all but Assured Going Forward

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 ...

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Delta Buys a Refinery, Adding to Downward Pressure on Fuel Prices

NADA has predicted that fuel prices will continue to moderate, and now we have one more piece of evidence for this position. The Wall Street Journal reported today (subscription required) that Delta Airlines has reached an agreement to buy the shuttered Phillips 66 refinery in Trainer, PA. This refinery was commonly held up as an example of how oil companies are shutting East Coast production facilities due to slim profit margins on gas and diesel. Now that the facility will be put back into service, the volume of refined products potentially available to East Coast customers will increase by 185,000 barrels per day. While this number is a fraction of total US output, an increase in potential supply is a qualitative data point that will be considered by the individuals and entities who establish fuel price contracts. So why did an airline purchase a refinery? Delta’s main goal is to increase control over their largest expense. In 2011, fuel represented 36% of the company’s operating costs. The airline ...

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Class 8 Construction Market Likely Benefiting from Drilling and Fracking

Buyers of Class 8 construction trucks seem to be finding a comfort level with pricing. Looking at the retail graph below, average selling prices became much more consistent in early 2011. Since then, price levels have increased moderately – from an average of $69,046 in the first half of 2011 to $74,760 in the second half. The first quarter of 2012 is steady at $74,573. The wholesale graph paints a somewhat less optimistic picture of the market. The second half of 2011 was actually lower than the first half by about $1000, which we consider essentially no change. We should note that due to the low volume of trucks sold in this segment, it is difficult to make specific judgments about model year and region in either the retail or wholesale channels. However, general trending is valid. It is all but certain that the bottom of this market is behind us. The sectors of construction that would make a major impact on demand for trucks – residential, commercial, and infrastructure - have not yet recovere ...

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Used Truck Prices Unfazed by Economic Uncertainty

Preliminary March data indicates that the Class 8 sleeper market ticked up a bit on slightly lower average mileage. Four-year-old sleeper tractors were also up notably despite higher mileage. Dealer sales volume? Comparable to the best months of 2011. Like last year, selected economic measures have slowed their rate of improvement going in to the 2nd quarter. However, also like last year, the economy on average continues to slowly improve. In the final analysis, the biggest factor limiting growth is “uncertainty.” There are many factors contributing to this uncertainty – some legitimate, some a little ridiculous – but at the end of the day, if a factory continues to receive orders, it’s not going to curtail production because it’s afraid of the European debt crisis. Like everyone else, we have been watching new truck order rate, which to date in 2012 lags the 2011 average by just under 25%. However, keep in mind that there was a degree of artificial inflation to the second half of 2011 due to the impend ...

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