How the Commercial Trucking Market Cooled Down in Q1 2023
At the beginning of the year, we discussed the bumpy ride that truck values took throughout 2022. Average prices and age were particularly high, while activity rebounded from the lows of 2021. Towards the end of the year, it appeared that we were headed to a semblance of normalcy, although there was uncertainty about looming economic challenges.
So it’s no surprise that, in the first quarter of 2023, market activity reflected concerns about a potential recession, slowing demand, and rising interest rates. According to FTR’s Trucking Conditions Index (TCI), which monitors conditions in the trucking industry, weaker freight rates and volume are creating a negative environment for commercial trucking.
But that may not be all bad news. As our data shows, this cooldown may give manufacturers and sellers some breathing room to address supply chain issues, while offering buyers a bit more flexibility with their budgets.
Prices Continued to Decline in Q1
After a rough couple of years of steady price increases, commercial truck values declined for the third quarter in a row. “With these consecutive price decreases, buyers are finally getting a reprieve from the highs we saw last year,” my colleague, Sam Pierce, points out.
Chart 1: Average truck prices dropped in Q1 2023.
Average truck prices reached $58,834, down 8% compared to the previous quarter. The decline was driven primarily by heavy-duty trucks. As you can see in the chart below, while medium-duty and heavy-duty trucks followed the same trend line, with a price peak in Q2 2022, the price decrease for heavy-duty trucks was much steeper.
Chart 2: Breakout of Heavy Duty and Medium Duty Truck prices for Q1 2023
Average Mileage Decreased, but Only for Heavy-Duty Trucks
Average mileage decreased by 8% in Q1. However, a closer look at the data reveals that, like the price drop, the decline in mileage was driven by heavy-duty trucks.
Chart 3: Average mileage is down for Heavy Duty; up for Medium Duty
Average mileage for medium-duty trucks actually increased, reaching the highest levels seen in the last two years. This may be due to the explosion of last-mile logistics and the more widespread use of Class 6 and Class 7 vehicles. Many fleet owners choose Class 6 and 7 vehicles to address labor challenges, since they don’t require a CDL.
Although average mileage for heavy-duty trucks was down, average age rose. “Even when you account for the age bump that comes with a new year, the average age of heavy-duty trucks on the market outpaced that of medium-duty,” says Pierce.
Chart 4 – Average age continues to rise, with Medium Duty trucks reaching an all-time high in Q1 2023
The long-term trends show how much limited inventories and stagnant supply chains have impacted the market. The average age of both medium- and heavy-duty trucks has increased by nearly two years since Q1 2021.
How Age Impacted Activity
Total activity declined compared to Q4 2022, which reflects a typical seasonal trend. However, heavy-duty trucks were behind the decrease once again. Sales for medium-duty trucks actually rose by 17%.
Chart 5: The overall drop in sales reflects a seasonal trend.
To get an idea of how long buyers wait before selling, we pulled data on activity by age. Trucks that are four to six years old are most commonly sold. At this slightly used phase, owners are selling off trucks they bought new to refresh their fleets.
Chart 6: Breakdown of Q1 2023 truck sales by age
There’s another bump in activity for trucks that are 12-15 years old. These are likely being sold by buyers who purchased slightly used vehicles.
Keeping Our Eye on the Cooldown
Demand for commercial trucks has been sky-high over the past few years, while supply has been tighter than ever. While the quality of the supply on the market, in terms of age and mileage, is still less than ideal for many buyers, the decrease in prices is a welcome respite. We will continue to monitor these trends and bring you noteworthy insights throughout the year.
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