Used truck market normalizes after early winter weather issues

Retail and wholesale volume both returned to trend in February, after an anomalous January, according to NADA’s latest Commercial Truck Guidelines. The market for medium duty trucks recovered to an extent, with mild strength in the Class 4 conventional segment and notable changes in the Class 6 segment.

“In general, economic conditions continue to improve, and most of the factors causing uncertainty in previous quarters are no longer in play,” says Chris Visser, NADA commercial vehicle sales analyst. “Upcoming months should return consistent results in most segments. “In the medium duty sector, Class 4 conventionals look the most promising, with mild upward movement predicted going forward.”

The medium duty cabover has recovered from an “essentially moribund” January, with auction volume up notably, although still off the average, the report says.

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Auction sales collected by NADA show benchmark four- to seven-year-old, Class 3-4 cabovers with under 200,000 miles selling for an average of $13,668. Average mileage was 112,307 miles.

Month-over-month, February’s pricing was $5,218, or
38.2 percent, higher than January’s, while mileage was
48,159, 30 percent lower. However, January’s results are not really valid for comparison,
since the unusually low number of trucks sold resulted in skewed figures, the report notes.

Year-over-year, pricing was 11.4 percen higher than last February, while mileage was 1.3 percent lower.

“Pricing since mid-2013 has been unimpressive. The supply of trucks with over 100,000 miles appears to be more than enough to meet demand,” Visser says. “At the same time, 2010 and newer trucks are performing better than the average, thanks to their much lower supply. Still, the comparatively low pricing of new Class 3-4 cabovers keeps a cap on pricing of used equipment.”

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Four- to seven-year-old Class 4 conventionals returned a relatively strong performance for another month.

Pricing was moderately lower than last month, at
$15,192 versus $15,845, respectively. However, this result
came with higher mileage, at 115,244 vs. 102,391.

Pricing is similar to the same time last year, although
mileage is higher.

“Higher pricing despite higher mileage indicates a strengthening market,” VIsser says. “As we mentioned last month, due to the wide variety of applications for a Class 4 conventional, it is likely that future performance of this segment will reflect the slow but steady growth of the economy overall.”

Last month, the NADA report suggested that January’s results for the four- to seven-year-old benchmark average were “an anomaly” due to extremely low volume driven by extreme weather. But February’s volume was also the lowest in at least 5 years, so additional factors may be in play.

One factor is the revised definition of “4-7 year-old,” Visser explains.

As of January 2014, the definition includes the 2008-2011 model years in place of the 2007-2010 model years. Since 2008- 2011 were low-build model years due to the recession, it is logical that there will be a lower number of trucks included if 2007 is removed – explaining this year’s major volume drop.

Additionally, the Class 6 segment is highly exposed to the state and municipal fleet sector. These entities were generally under budget austerity during the recession, which means they kept their fleets in service longer than normal, Visser suggests. In some cases, they skipped the 2008-2011 model years entirely.

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Looking at price and mileage, Class 6’s returned $21,988 in February, 6.3 percent lower than January, but $4,999 higher, or 22.7 percent, than February 2013.

Mileage was 180,982, 57,960 higher (32. percent) than January, and 2.5 percent higher than February last year.

Again, due to the extremely low volume of data, Visser expects higher than normal monthly fluctuations in these Class 6 measures.