If your company is struggling to find trucks for your drivers- you’re not the only one. Used truck volumes at auction have dropped 82% while truck prices have doubled in the last year. In June 2020, the two largest auction houses reported over 1,000 used trucks to hit auction compared to this year’s 192, according to JD power reports. This is a straight reflection of the market’s overall health.
Why is this? The current freight market is being driven by tight supply on the driver and equipment side. But unlike other recent freight cycles, it’s also being driven by high levels of freight demand.
“At this point, auction pricing for late-model sleepers is higher than any time in the six years we’ve been tracking our benchmark group,” says Visser. “And retail pricing is at or above any period in the 12 years following the Great Recession.”
Ongoing truck production constraints due to labor and part shortages have resulted in many buyers looking to the used truck market to add capacity to their fleets, but used truck supply is very low due to many large carriers being unable to trade out of trucks since they aren’t receiving their new truck orders. This has led to the used truck prices being significantly over-inflated. As I like to say, this is a great time to sell a used truck but (likely) a very bad time to buy one. Companies and individuals buying used trucks now run the risk of the market shifting and them being in very bad shape financially. Even if the used truck market remains inflated, the risk is very high that an IC will still be under finance/lease terms when the truck is out of even aftermarket warranties (those warranties that typically are added after the truck has 500k miles).
Parts supply issues are significant and shops have too few mechanics/doors for too many trucks are also major issues the industry is facing. Pricing for parts and shop labor rates have risen and are still on an upward trend. As a result, trucks are often down for longer than normal and the cost to get them out of the shop has steadily increased.
The best advice given to our company is that ICs need to be (and many have been/are) very serious about pro/post-trip inspections and about performing quality preventative maintenance. If they do this, their up-time will be increased and their overall maintenance costs will decrease over time, especially when looking at opportunity costs when a truck is down. To this end, some carriers are increasing the frequency of DOT inspections (and requiring that deficiencies are addressed and/or a plan is put in place for parts nearing the end of their useable life) and how often ICs have to provide proof that a B PM service has been performed.
All of that said, rates are incredible and many of our clients are making/keeping more money than ever. For ICs who do a good job of staying on-top of their maintenance, while they may still not be able to completely avoid all of the issues mentioned above, this is a great time to be an IC.