Used Class 8 truck prices are climbing sharply, with October costs up 54% compared to the same period last year and up 36% since the start of the year. This data comes from the latest ACT Research report.

ACT Research Vice President Steve Tam said the average retail price for used Class 8 trucks in October was $72,200, up from $46,900 in October 2020. He added that most of these trucks were sleeper models.

Tam noted that in the auction market, some used trucks even cost more than a new "standard" Class 8 tractor, which runs about $140,000 per sleeper unit.

"I think this is the first time the industry has experienced this situation," Tam said.

Compounding the problem is thesemiconductor shortage, which is heavily used in new tractors. Supply constraints haveslowed production of new Class 8 trucks, which may be the biggest factor driving up used truck prices.

Facing the semiconductor shortage and truck demand, FTR Vice President of Trucking Avery Vise worries the transportation industry will face new problems, adding to existinglabor constraints、truck parkingandLTL terminal real estateamong other challenges.

"We could see a truck shortage become a bigger problem than the driver shortage (in 2022)," Vise said. "We're already seeing this on a small scale."

Few doubt that large carriers won't pay extra due to market conditions, but small fleets and owner-operators may face financial difficulties that will be harder to cope with if spot rates decline.

High Costs and Deeper Debt Risks

Typically, lenders prevent small players from over-borrowing for used trucks, but current market conditions have made capital flow more freely.

"Financing institutions are quite optimistic," Vise said. "However, as conditions continue to tighten - and they will tighten - this will become an increasingly bigger problem."

Vise said consumer spending is unlikely to sustain its current level in the long term, which will make financing more difficult for small fleets.

When purchasing used sleeper trucks, buyers may take on more costs and deeper debt. Used truck buyers are mostly owner-operators or small carriers, who are especially vulnerable to high debt and thin margins. Vise noted they are typically more leveraged because they lack working capital. When diesel prices rise, small carriers and owner-operators often bear the brunt because they need to pay fuel bills immediately.

"We could see a truck shortage become a bigger problem than the driver shortage (in 2022)."

- Avery Vise, Vice President of Trucking at FTR

Used truck costs are so high that an official from the Owner-Operator Independent Drivers Association (OOIDA) warns buyers to be wary of over-indebtedness.

OOIDA President and CEO Todd Spencer said that although spot rates currently give independent drivers ample monthly cash flow, conditions could change. He said the trucking industry'sbubble has burst multiple times。

"That's the reality," Spencer said. "You make business decisions out there. In the short term, we may be doing well. But in the long term? Essentially, don't overextend."

There is currently little sign that upward pressure on used truck prices will ease soon. For future buyers, the outlook is not optimistic: no one seems to know exactly the size of the used truck inventory in North America.

"You can't stop them to count them," Tam said.

Vise said he has heard that some fleets don't even have trucks to place newly recruited drivers. This makes fleets more willing to keep existing trucks, thereby pushing up price pressure.

This also means small carriers and owner-operators will face greater difficulty in adding capacity than large fleets. Vise said this could also prevent company drivers from going out on their own as owner-operators due to used truck prices.

A Seller's Market for Used Trucks

While some fleets face financial challenges in acquiring trucks, other companies benefit from the seller's market.

Ryder reported on itslatest earnings callthat its fleet management division had pre-tax earnings of $186 million, up $170 million from the same period last year, with $93 million coming from increased gains on used vehicle sales. Ryder CFO John Diez said tractor gains increased 32% quarter-over-quarter and truck gains increased 27%.

"Higher sales gains reflect significant improvement in market prices," Diez said.

But supply chain issues limiting new truck production have spilled over into the used market, reducing Ryder's used truck inventory.

Supply Constraints Lead to Lower Used Truck Sales and Inventory

Ryder's quarterly used truck sales and inventory have both declined.

Penske reported on itsOctober 27 earnings callthat the revenue jump was partly attributed to used truck demand.

CEO Roger Penske said on the call that the business was driven by OEM delays of about 13 months in delivering new trucks. This shortage is compounded by rising freight demand.

"This will drive this business for the next 12 or even 24 months," Penske said. "This is what's pushing up used truck prices, because most fleets can't get new trucks today. So they keep using their old trucks, maybe for another five to six months. This also drives up used truck values, but I don't see any slowdown."

"You can't stop (used trucks) to count them."

- Steve Tam, Vice President at ACT Research

Fleet executives also noted they took advantage of higher market values to sell older equipment.

Schneider CFO Steve Bruffett told investors on an October 28 investor call that the company "took advantage of the strong used equipment market in the third quarter." Werner CEO Derek Leathers said on a call the same day that pricing in the used truck sales market in the third quarter was "better than expected," with gains of $15.3 million, up from $13.5 million in the second quarter.

Used truck buyers eventually become sellers. Older equipment will continue to trickle down to smaller fleets, with age increasing and prices decreasing. However, when initial prices are high and the market remains tight, resale prices will stay high.

J.D. Power researchseems to confirm this: in October, the average retail price for a 2017 model sleeper truck was $72,682, and for a 2016 model it was $55,904. In October 2020, the average sleeper truck price was $38,734.

"This cascades through the entire process," Tam said.