Posted on 06/21/2022 2:57:26 PM PDT by blam
Auction prices of used trucks 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,/B>
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,/B>
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.”
Last ones in, last ones out; usually lose money. Pick a market and it holds true.
“Now owner-operators who overpaid for equipment stand to get burned.”
Being the perceptive individual that I am, I caught the key word in that phrase right away.
Generally, when you “overpay” for something, it ends up poorly.
If you had the money, it’s probably a great time to buy in anticipation of becoming an owner operator in 2-3 years.
Next Friday will be my 22 year old son’s last day driving for a lumberyard.
He’s going to work for a large flatbed fleet and going OTR
Zulu Brothers: “Every silver lining has a gray cloud. We report that cloud.”
Good luck to him. My uncle started at 21 and stopped at 39 before he settled down and got married. During those years he’s been to all 49 lower states or obama’s 57 states. The stories he would tell..
Unfortunately, any market is driven by what the least astute participant is willing to pay. This market, like real estate, was overrun by the least astute. Also unfortunately the least astute are usually the first to cut and run, leaving the more astute to absorb the losses.
I think he’s going to really enjoy it.
I met a guy the other day. I think he’s 92 and still an active trucker.
92? Wow. My uncle tells me start young and single because long haul truckers are on the road 24/7, and it will put a strain on relationships. My brother in the Knights of Columbus , chose to do in-state trucking so he can come home the same day to his family, at least. Back then, he had the idea to post his “adventures” on Youtube when it was starting and lo behold, there’s a lot of them doing it now..
I’ve met a few YouTube truckers. Sasnak, TruckerG, OTR and others.
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