Class 8 Retail Depreciation Continues to Accelerate

Depreciation is accelerating, which should come as a surprise to no one. Low-mileage trucks are still bringing fairly strong money, but the definition of “low-mileage” continues to revise downwards. The freight environment remains fairly strong, albeit cooler than last year’s superheated environment. The upcoming holiday shipping season should help limit the acceleration of devaluation.

The average sleeper tractor retailed in October was 72 months old, had 462,703 miles, and brought $50,581. Compared to September, the average sleeper was 3 months older, had 5,592 (1.2%) more miles, and brought $1,668 (3.2%) less money. Compared to October 2018, this average sleeper was 5 months older, had 3,600 (0.8%) fewer miles, and brought $6,101 (10.8%) less money.

Looking at trucks two to five years of age, October’s average pricing was as follows:

• Model year 2018: $100,469; $11,338 (10.1%) lower than September
• Model year 2017: $74,376; $5,646 (7.1%) lower than September
• Model year 2016: $58,782; $3,441 (5.5%) lower than September
• Model year 2015: $46,415; $928 (6.6%) higher than September

Year-over-year, late-model trucks sold in the first ten months of 2019 brought an average of 6.6% more money than in the same period of 2018. However, this positive result is due entirely to market strength in the first half of the year. Narrowing our focus to September-October 2019 vs. September-October 2018, 2019 is actually running 5.1% behind.

Depreciation in the first ten months of 2019 averaged 1.8% per month, compared to well under 1% in the same period of 2018. Again, this monthly average is heavily skewed by first-half market strength. Looking only at the most recent three months, depreciation averages 2.6%.

Looking forward, U.S. trade officials continue to comment optimistically about the progress of trade talks with China. However, very little concrete action has been taken. Economists universally agree the economy is being artificially held back by this uncertainty and inefficiency. Also, the domestic manufacturing sector remains very subdued. This leading indicator has pointed to a macro slowdown for at least a full quarter, and sooner or later one of two things will happen - manufacturing will start to tick back upwards, or the economy will contract. Resolving the tariff war would bolster this sector as well as encourage business investment in general. These are the demand-side considerations coloring our value forecasts going forward.