Used truck prices poised to continue to fall until 2020, analyst says

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Clough showed these two slides in his presentation, pointing to the high used inventory in 2008 (right), driven by low demand before the onset of the Great Recession and high build rates in the years prior. The photo on the left shows the same lot — nearly empty — in 2013. The 2013 used supply shortage was due to low build rates in 2009, 2010 and 2011, along with greater demand. Prices peaked in 2013, Clough said.Clough showed these two slides in his presentation, pointing to the high used inventory in 2008 (right), driven by low demand before the onset of the Great Recession and high build rates in the years prior. The photo on the left shows the same lot — nearly empty — in 2013. The 2013 used supply shortage was due to low build rates in 2009, 2010 and 2011, along with greater demand. Prices peaked in 2013, Clough said.

Given the high truck build rates in 2014 and 2015, the market for 3- to 5-year-old tractors is set to be flooded in the coming few years, a supply-side pressure that will continue to put downward pressure on used truck prices, said Arrow Truck Sales President Steve Clough.

“Used truck supply goes a long way in determining the environment” for pricing, Clough said. “The supply of used trucks has already been determined based on what was retailed 3, 4 and 5 years ago. That’s a wall of inventory that’s coming.”

Clough spoke Thursday, Sept. 15, at the 2016 FTR Conference in Indianapolis, Ind.

He said as of July, prices for 5-year-old tractors (2011 model) were down about 15 percent year over year, 4-year-old (2012) tractors were down 16 percent and 3-year-old (2013) tractors were down 18 percent. Those numbers are in line with monthly NADA data published on Overdrive in recent months.

“The amount of trucks I anticipate coming back as used trucks for the first time will continue to grow,” he said. “It will probably peak in 2019 or 2020. Increasingly, supply will continue to put downward pressure on pricing.”

Truck build rates in recent years.Truck build rates in recent years.

Used truck pricing had been accelerating in recent years, as the low truck builds of the Great Recession and after — 2008, 2009 and 2010 — capped the used market’s supply. The new truck build rates of those years caused a  “shrinking, shrinking, shrinking” supply until 2013, Clough says, when the market stabilized some.

Used truck demand jumped into the pricing equation in 2015, when freight and rates began fizzling. Since the middle of last year, both truck supply and truck demand caused used truck prices to begin tumbling.

“Spot rates affect used truck buyers more,” Clough said, “because they tend to work that market more.”

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