Market Absorbs High-Mileage Trucks as Correction Continues

A substantial volume of trucks with higher-than-average mileage sold in May. The market is absorbing trucks from owner-operators leaving the industry or going to work for a fleet, and also from larger fleets no longer retaining all of their older iron as new trucks trickle in. The month-over-month differences below are pretty severe, and we do think the results are reflective of actual market movement. On the positive side, the newest trucks – as well as those with lower mileage - are still bringing strong money.

Looking at two- to six-year-old trucks, May’s average pricing for our benchmark was as follows:

• Model year 2021: No trucks sold in May
• Model year 2020: $136,732; $16,848 (11.0%) lower than April
• Model year 2019: $95,653; $17,132 (15.2%) lower than April
• Model year 2018: $88,452; $9,736 (9.9%) lower than April
• Model year 2017: $59,854; $552 (0.9%) higher than April

In May, three- to five-year-old trucks averaged 12.0% less money than April, but 57.5% more money than May 2021. Year over year, late-model trucks sold in the first five months of 2022 averaged 82.6% more money than the same period of 2021. Year-to-date, four- to six-year-old sleepers have depreciated 6.6% per month on average.

If you’re attending Class 8 auctions, you’ll probably agree it feels more like pre-pandemic times. Volume is up somewhat, with a substantial number of higher-mileage trucks selling for unimpressive money. That said, pricing is still more than 50% ahead of last year, and the newest trucks – as well as those with lower-than-average mileage – are still commanding very strong money. We’ve been saying the biggest hits to pricing will come early in a correction. We are currently in that phase.

Trucking economy data shows rising terminations of owner-operator authorities and a steady decline in spot rates from February through May. Taken alone, those two items could suggest the new owner-operators who entered the industry in 2020-2021 are now exiting the industry, with ominous implications for excess equipment. However, overall truck transportation employment continued increasing through the spring, and May was actually the highest month in recorded history for that sector. As such, it seems either these new owner-operators are largely going to work for fleets, or fleets are hiring new drivers at a rate similar to owner-operators leaving the industry.

If truckers aren’t leaving the industry in droves, why are truck prices dropping? As we’ve said in the past, market shifts don’t require a major change in used truck supply. For example, in the pricing downturn of 2019, the volume of trucks in our auction benchmark group increased by roughly 1,000 total over the entire peak-to-trough period. Remember, it’s not just the number of trucks available, it’s the number of trucks available for the freight economy we’re in.

At this point, that freight economy is a tale of two sectors. If your customers are mainly small fleets and owner-operators who operate in the spot market, you’re hearing the sky is falling. If your customers are mainly larger fleets who operate in the contract market, you’re hearing conditions are still strong. Used truck supply and pricing will continue to reflect the reduced demand for spot freight as well as more typical expectations for capacity needs in upcoming quarters.