Fleet bankruptcies add downward pressure to used truck prices

Used trucks behind fence

Idled power units from fleet failures and bankruptcies are further pressuring used truck prices that closed the year 14% lower on average compared with 2018.   

“A lot of excess inventory will simply sit here in the U.S. and represent a sunk cost on someone’s balance sheet,” Chris Visser, J.D. Power commercial vehicles senior analyst and product manager, told FreightWaves on Thursday.

Hundreds of trucking companies failed in 2019, with several entering bankruptcy protection. Their unused trucks may end up being sold to raise cash to pay creditors. But some less desirable models will end up being scrapped. 

These tractors add to a clogged pipeline of used trucks traded in for new units from a late 2018 fleet ordering frenzy to replace them.

Limited exports

The prices of newer used fleet units limit export demand. But with new truck prices also depressed by a lack of new orders and high inventories, Visser speculated Southeast Asian and African countries may be interested in newer trucks.

“There are only so many trucks these countries can take, though, and the legal and regulatory scenarios can be a moving target,” he said.

Downward pressure

The downward pressure on used truck prices for Power’s benchmark group of 4- to 6-year-old trucks was particularly heavy in the fourth quarter when the year-over-year decline in auction values was nearly 31% compared with 2018.

“We’d need to go back to the recession period of 2008-2009 to see a bigger year-over-year decline in auction pricing,” Visser said.

Dynamic December

Class 8 auction volume increased dramatically in December, though pricing dropped more than expected, according to Power’s Commercial Truck Guidelines newsletter. Trucks sold at retail also lost value as only low-mileage trade-ins attracted significant interest from buyers.

Fleets and dealers typically seek to get unused trucks and excess inventory off the books at the end of the year.

Auction activity of 4- to 7-year-old used trucks suggests that fleets disposed of older units before year-end in favor of new trucks they ordered that feature better fuel efficiency and safety equipment that could positively impact insurance costs and total cost of ownership (TCO).

Monthly markdowns

The influx of used trucks in December drove month-over-month pricing markedly lower:

  • Model year 2016: $27,051 average; $3,699 (12%) lower than November
  • Model year 2015: $23,697 average; $3,246 (12%) lower than November
  • Model year 2014: $19,376 average; $1,990 (9.3%) lower than November
  • Model year 2013: $15,954 average; $1,212 (7.1%) lower than November
  • Model year 2012: $13,559 average; $2,391 (15%) lower than November

Model year 2011 was an outlier. The average $12,667 price was $3,417, or 36.9% higher than in November.

Monthly depreciation for 4- to 6-year-old trucks averaged 3.5% in 2019 compared with essentially no depreciation in 2018. Pricing for late-model trucks is now roughly 10% lower than the last market bottom in 2016.

“If anyone’s holding on to an average- to high-mileage truck hoping that its value will recover, my advice would be to trade now,” Visser said. “There are so many average- to lower-mileage trucks available right now that I don’t see older units recovering in 2020.”

But lower prices cut both ways.

“There are incentives on new trucks, and used trucks are extremely affordable,” Visser said. “So even though your current rig is worth less than it was a few months ago, so is that newer truck you might be looking at.”