Hammer to fall: Used truck auction prices dropping quickly

three used trucks at a Ritchie Bros. auction in Houston

Auction prices are falling almost as quickly as they rose over the last year. That is leaving owner-operators stuck with overpriced equipment they thought they could pay for in a hot spot freight market that is cooling off. 

“The market is primarily absorbing trucks from fleets no longer retaining all of their older iron as new trucks trickle in and, to an extent, from owner-operators leaving the industry or going to work for a fleet,” said Chris Visser, senior analyst and commercial vehicles product manager for J.D. Power Valuation Services.

In its latest Guidelines report, Power said auction prices in May for model year 2020 used trucks fell 11% from April. Prices for model year 2019 trucks fell 15.9% month over month and 2018 models dropped 9.9%. 

“In May, 3- to 5-year-old trucks averaged 12.0% less money than April, but 57.5% more money than May 2021,” Visser said. “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.”

Getting stuck by high used truck auction prices

When spot rates were paying $4 a mile and more, no price was too high for a fleet to add capacity. The idea was to take advantage of record-high rates and not worry about the equipment price premium. Now owner-operators who overpaid for equipment stand to get burned.

“Trucking economy data shows rising terminations of owner-operator authorities and a steady and notable decline in spot rates from February through May,” Visser said. “Taken alone, those two items could suggest the new owner-operators who entered the industry in 2020-2021 are now exiting the industry.”

Overall truck transportation employment increased through the spring. May was the highest month in recorded history for the sector. That suggests new owner-operators could be going to work for fleets.

Retail prices still elevated

Retail prices in dealerships are still near record highs. Pricing moves tend to trail auction auctions. As rates fall, so will truck demand and prices, according to Steve Tam, vice president of ACT Research.

“Unfortunately, long-awaited reports of loosening inventories come at exactly the wrong time in the cycle,” he said. “This is the beginning of the end of the cycle, which promises to be every bit as exciting on the way down as it was on the way up.”

Just as auction and retail prices vary, the freight market consists of contracted and spot-rate pricing.

“If your customers are mainly small fleets and owner-operators who operate in the spot market, you’re hearing the sky is falling,” Visser said. “If your customers are mainly larger fleets who operate in the contract market, you’re hearing conditions are still strong.” 

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