Increase in Second-Hand Truck Sales - Established Market Players, Not Newcomers, Behind the Boost
In a recent development, used Class 8 truck sales have seen a significant increase, up by 29% in July, according to Equipment Finance News. However, this surge does not necessarily indicate a recovery in the market.
The increase in sales is largely due to fleet consolidation, with larger small fleets acquiring trucks from failed one- and two-truck operations. This trend is reshaping the market, redistributing it to carriers with tighter margins, better compliance, and longer-term strategies.
Despite the surge, the average retail price of used Class 8 trucks has dropped more than 10%. This, coupled with the current state of the market, suggests that affordability does not guarantee profitability.
The Outbound Tender Rejection Index (OTRI) is at 6.17%, indicating a broker's market. Rates might lift in Q4, but capacity is being reshaped, not grown. Rates are showing signs of stabilization, but not rebounding.
Lenders are cautious, but buyers with stronger books and better operations are still active in the market. Many are interested in 5-year-old models. Larger small fleets are advised to reinvest in their systems rather than their fleet size, focusing on compliance, load selection, dispatch and back-office operations, and building relationships with brokers and shippers.
Net new carrier authorities (granted MINUS revoked) are barely above zero, showing a 57.69% decline in the last measurement period. This suggests a challenging environment for new entrants.
The surge in used truck sales may not be justified by the current market conditions unless one has leverage and a plan. Now is not the time to chase trends, but to study the market and tighten up every bolt in a business before considering buying another truck.
Interestingly, many small bodywork companies are buying trucks because the market for certain types of used trucks, especially all-wheel-drive trucks, is being intentionally limited by dealers to increase demand and prices. This trend is often driven by stories around these vehicles and their potential in niche markets such as waste management or custom builds.
Despite the challenges, it's clear that carriers who make it through this cycle and succeed in the next one will not have bought trucks at the bottom, but will have had a business model ready to support growth when the time is right. Carriers are still finding ways to finance equipment, despite tighter lending requirements.
In conclusion, while the surge in used truck sales may offer opportunities, it's crucial for small carriers to approach this market with caution, focus on strengthening their operations, and carefully consider their investment strategies.
