Mid-Year Developments in the Class 8 Truck Market

Steve Katz 

Hi, everybody, and thanks for taking time out of your busy schedule to listen in on our Hilco Global, smarter perspective podcasts. As returning listeners know, I’m your host, Steve Katz. And if this is your first time with us, well, welcome. We’re really glad you could tune in. We got a great discussion for you today, we’re going to be talking about the class eight trucking market, what’s been going on with used asset valuations there, and what we’re likely to see for the balance of the year. And with us for that conversation is Bryan Courcier, a senior vice president and Hilco valuation services. Bryan, welcome back.

Bryan Courcier 

Great to be on again, Steve. Thanks for having me.

Steve Katz 

Yeah, we’re always, always happy to have you on. And this is kind of a quick midstream check in just to bring listeners up to speed on a couple of key developments that you and the team said that you’re observing right now. So as we were discussing before, the podcast class aid, trucking is still trading above pre pandemic levels. But I guess that’s not the full story. So what can you tell us about the current trend?

Bryan Courcier 

Yes Steve, thanks. You’re absolutely right, as we approach the midpoint of the second quarter, used class 8 Trucking is still trading above pre pandemic levels, as you mentioned. And you can see this, really at all transactional levels within the space, whether it be retail, wholesale or auction, but what’s easiest to follow is really the public offering or the public data, which is primarily in the auction space. And it’s a clear indicator really, of how far the market still has to go in terms of post pandemic downward, correct. And we’re finding that a lot of our clients are experiencing a little bit of sticker shock when it comes to adjusted values and fleet appraisal, compared to the same place that were valued six to 12 months ago. So our clients in the ABL lender space in particular, we’ve been having some difficult conversations with them. And a lot of that is centered around the negative value adjustments that we’re seeing in our appraisals, relative to what we were valuing the same fleet those six to 12 months ago, pandemic pricing really created a challenging environment, because we knew this was going to happen with a really premium value occurring. And I wouldn’t so much call it a bubble. But it was something that we could really see occurring in the space, and we knew it was unsustainable. But that didn’t stop us from having a requirement to provide appraisal, and market valuation. We just knew that it wasn’t going to be a long term premium value environment, following the pandemic, and so what we’re now grappling with is adjusted values going into 2023. So what we’re really advising our clients of is that it’s unrealistic to expect further cyclical appreciation of value in truck and trailer fleet. We just can’t realistically expect there to be an appreciation of value in that multi year cycle.

Steve Katz 

Yeah, makes sense. And I know, as you said, You guys saw this coming. And I remember in our last discussion, you referenced the significance of the correction that had already begun late last year. So I guess what I’m wondering is, maybe there’s a tangible example you can point to that illustrates what’s happening with valuations right now, just to kind of drive it home for listeners.

Bryan Courcier 

Sure, yeah. Anecdotally, we can speak about the international pro stars 2015 model international pro stars, for example, were wholesaling and auctioning at the beginning of 2020, somewhere in the mid 20,000s range up until the low 30,000s. And what we’re seeing in the market, at least in the public auction spaces here, you know, at the end of Q1 and beginning of Q2 in 2023, are those same assets, the 2015 Pro stars selling anywhere from 10,000 to $30,000, depending on the spec, the condition and the mileage. And if you really take a step back and think about that, those 2016 year models are selling for the same price in a lot of scenarios that they were three years ago. However, what we’re seeing is those units have are of course, three years older, have additional mileage and additional wear on them. So if you really think about it closely, that is a massive sort of key indication that we’re nowhere near the bottom of the correction. The most dramatic corrections have occurred, but we’re still a long way from that fully sort of working itself out.

Steve Katz 

Yeah, that’s a perfect example. And I would think that that’s something that we’re going to be seeing more and more of right. And in terms of what’s hitting hitting the market right now, these high mileage vehicles that were maybe overworked and under maintained during the pandemic, and then, you know, the shortage of new truck availability on top of that, is that right?

Bryan Courcier 

Yep, that’s absolutely right. And I think buyers in particular, are becoming more savvy, not that they weren’t savvy prior, but I think they’re paying more attention, I’d say, to the finite details of each unit within a fleet, so high mileage, and poorly maintained vehicles, that’s going to have an impact on value. And also, you know, when there are falling truck values that typically hit the auction first. And it’s most dramatically felt in that space. When it comes to wholesale retail values, those are sort of on a trailing basis. And they’re, they’re a little bit less dramatic, but they still nevertheless occur in those areas as well. We very regularly on a daily basis, monitor auction sales. And you know, month to month, pricing is really the most real time indicator of a tangible market trend, because that’s where you really see enough volume in transactions to really crack something and know that it’s a market trend.

Steve Katz 

Yeah, interesting. I know, you guys are all over the auctions. So that I mean, that is super current information that you’re bringing in, or listeners right now, which is great. And with all of these factors in mind, how do you suggest that fleet operators and lenders with exposure in the space think about and approach the next several months?

Bryan Courcier 

You know, I think there’s there needs to be sort of a little bit of a reset, and that some honesty, that and real conversations that occur there and recognize that the year over year change, that the current from 22 to 23, was very dramatic. And that was something that was predictable. And that was predicted, continued correction and to be expected for the year, we just know, it’s not going to be as dramatic or we believe it’s not going to be as dramatic as the declines that we saw in late Q3 and Q4 of 2022, but that doesn’t diminish the fact that Trucking is still very much the backbone of domestic logistics. And so it’s a core industry that to a certain degree is very stable, and truck production continues to ramp back up. And new units are more expensive than ever. And that means used units are still going to be in great demand with constrained credit environments, and sometimes a lack of buying power when it comes to those new units. But smart buyers are going to be looking for lower mileage better maintained used trucks. As pricing adjustments continue in the used market understands utilization, specifically, and how they’re maintained in place individual carrier, above or below industry trends. So when it comes to a lending perspective, you really need to know who your operator is, who your customer is, and whether they’re maintaining their fleet really well. And they’re doing the routine maintenance as required. And also you need to become familiar with the industry as they work within and know whether it’s a little bit kinder to the fleet, or if it’s really going to beat them up by whatever operations are performing.

Steve Katz 

All right, well, once again, knowledge is key understanding the market understanding the assets and the operators is always critical. So Brian, thanks again for your insights. And if listeners want to reach out to you to discuss their specific situation or challenges they might be experiencing in regard to fleet assets and use classy valuations. How should they get in touch?

Bryan Courcier 

Yep, absolutely. Thanks, Steve. I’m always happy to share what our thoughts are and our experiences in the space. You can always reach me by email or phone. My email is bcourcier@HilcoGlobal.com. Or you can always reach out by phone 7206365123.

Steve Katz 

All right, perfect. Thanks again, Brian and listeners. As always, we hope that the smarter perspective podcast provided you with at least one key takeaway that you can put to good use in your business or share with a colleague or client to help make them that much more successful moving forward. And remember that you can check out more great podcasts and articles featuring timely insights from Hilco experts at HilcoGlobal.com/smarter-perspectives. So until next time, for Hilco Global, I’m Steve Katz.