By Bill Bishop, SVP of Sales and Marketing, FLD Remarketing
November 13, 2024
Hello and welcome to the third installment of the 2024 White Metal Market Report, our quarterly look at news, views and important topics affecting the used white metal vehicle market (we even chime in on the big trucks too). As we’ve done the last few years, we’ve waited until well into the 4th quarter to give you our thoughts before finishing kicking off 2025 with our big year end wrap up and look ahead to 2025 in January.
STUCK ON A FEELING, HIGH ON BELIEVING
Looking back on the third quarter is a lot like looking back on the rest of 2024 – and a good part of 2023 as well. For the most part, used vehicle markets (more on those later) have stabilized after experiencing a rocky four months – so a mildly up and down year with very few deep valleys or towering peaks.
The economy has shown some signs of strength, with record consumer spending continuing to defy the recession many economists have been predicting for the better part of 18 months. Given this strength in the face of rising inflation, our team believes a wholesale recession is unlikely and that a soft landing – especially now that the Presidential election has been determined – is possible. Hardly a ringing guarantee but considering the economy’s ability to adapt to some very trying circumstances this year – including stubbornly high interest rates – we remain hopeful. Despite this, we would be remiss if we didn’t admit that we still see signs of a looming recession, and the possibility of a significant move downward should something newsworthy – or worse – occur on the national or world stage.
TRADITIONAL INDICATORS GENERALLY POSITIVE
Taking a look at the traditional economic indicators we’ve used for years to predict where the wholesale vehicle market is headed, we continue to see a mixed bag of minor headwinds. Nothing glaring, but enough to make us believe the economy – and the wholesale vehicle market in kind – still have a way to go before calmer seas become the norm.
At this point, housing remains volatile, with prices continuing to rise in most parts of the country, and many waiting for the previously mentioned interest rates to retreat before buying or selling.
Unemployment remains moderately elevated (4.2 this year vs 3.7 in 2023,) but the demand for mobile workers remains high. Meanwhile, a strong US dollar continues to suppress both demand and pricing in the international arena.
Fuel prices, for the most part, have been a non-factor, with the cost of diesel down 20% from a year ago.
One bright area – final mile delivery – continues to drive demand for Euro style and traditional work vans, vehicles that have been hard to come by since the pandemic.
WHOLESALE USED VEHICLE PRICES PRESENT A MIXED BAG
As we predicted in our Q2 WMMR used vehicle prices softened slightly during Q3, with the overall market down an average of 10% compared to Q3 2023. Some portions of the heavy segment are down 50% year-over-year, but that’s more the exception than the rule.
As we experienced earlier this year, the smaller the vehicle, the bigger the demand, with prices for passenger vehicles and light duty only slightly lower this year, but assets like work trailers down over 60% year-over-year in September.
To put things in perspective, used vehicle prices are still 50% higher than 2018-2019 – certainly not a bad thing.
Overall, used vehicle supply and inventories were stable in Q3, but remain down for the year. As I often heard during the pandemic, “you can’t sell used vehicles without making new ones.” Something we saw very little of over the past few years. A harsh reality that has forced fleets to hold on to aging assets much longer than they either wanted to or had ever done in the past. We saw the beginning of the decline in production and lease level back in 2020. By 2022 things started to look better, but then chip and supply chain issues took hold. The later third of 2023 was solid, but it’s almost like the industry can’t catch a break, and we predict it will be several years before the lease return and rental return normalize.
This likely once in a generation occurrence has put a premium on low mileage, high quality vehicles, and continued to flood the market with distressed assets, something we believe will continue for at least the next year. In over 35 years in fleet, I can honestly say I’ve never seen a greater divide between condition and miles. And while new vehicle availability is undoubtedly headed in the right direction, it hasn’t approached pre-pandemic levels, and it’s doubtful that it will anytime soon.
Further pressuring the market?
The used vehicle situation is being exacerbated – according to our own Customer Advisory Board of top work fleet managers – by OEMs who have often been arbitrary, secretive and in some cases punitive, often demanding commitment to new services or programs to ensure vehicle allocation.
Obviously, these factors will continue to weigh on the used vehicle market as we bring an end to 2024. Not a pretty picture, but hardly insurmountable.
Here’s a look at what we’re seeing with respect to how each vehicle class performed in Q3 2024:
- PASSENGER and LIGHT DUTY assets were the first to stabilize and hold steady earlier this year and continue to do so, off roughly 10% year-over-year in Q3. Pickups and Vans performed slightly better than luxury and sports models.
- CLASS 3 to 5 TRUCKS have softened slowly this quarter with medium duty stable as inventories remained flat. Age and miles – which have stabilized as well – have been creeping up steadily for the last six quarters. Cutaways and smaller boxes have been hit the hardest, off roughly 35% year-over-year. Flat bed and service bodies have fared mildly better.
- CLASS 6-7 TRUCKS have presented a mixed bag. Box trucks have been flat to slightly down. Some makes and models have seen larger declines due to engine issues, further adding downward pressure to units that already have more miles and dings that at any time in the last 50 years, maybe longer. Vocational builds have been stable. Continued issues with body building have kept these vehicles in demand. One outlier here has been bucket trucks, which have seen a sharp decline in the last five months, off as much as 50% year-over-year.
- CLASS 8 trucks have seen “see-saw” action – up slightly one month and down again the next. Day cabs have been the most stable units in this class. Vocational heavy trucks have also remained strong. Sleeper trucks have been very volatile. Weak freight demand and an oversupply of trucks have also been tough on this segment this year.
LOOKING TO CATCH A BREAK, BUT EXPECTING MORE OF THE SAME
For a year that started off a little rocky and has continued with a few rough patches, 2024 has turned out to be fairly benign – something akin to treading water. Nothing spectacular, but by the same token, nothing disastrous either. Kind of what I like to call a “groundhog day” kind of year – essentially more of the same from quarter-to-quarter with a slight move up here, and a minor down move there. And while there’s a possibility that could change for good or bad, the reality is that we expect the rest of Q4 – and likely the beginning of 2025 – to be similar. Something that could undoubtedly change should election fallout or a shaky economy send things in the wrong direction.
Looking out on the rest of the year – which is often quiet once the holidays roll around – here’s what we expect over the next few months:
- While it’s anyone’s guess what will happen, fallout from the Presidential election will likely have some effect on the used vehicle market (and our team will be watching to see what that is and whether it’s negative or positive).
- Vehicle availability will continue its up and down path and we do not expect a sudden wave of used vehicles to hit the market in 2025, further bolstering the price of used units, especially high quality, low mileage units.
- If what we’re hearing from our Customer Advisory Board is true, we expect continued friction between fleets and OEMs.
- On the same note – headwinds and consolidation in the US new vehicle market are likely, with many dealers forced to offer incentives for the first time in years on even the most desirable units. And even more to move EVs, which have fallen drastically in price as competition from China trickles into the US market. Not sure how this will play for OEMs like Stellantis, who continue to hold to 30% price hikes over the past few years.
- US auto manufacturers sold 18 million new vehicles in 2005, when America’s population was roughly 240 million people. This year they’ll sell 15 million vehicles to a country with 350 million people, so revenue will need to come from other sources (like financing and connected services).
- Small and local trade businesses will continue to gravitate to used work vans and trucks, as the reality of $1k-plus monthly payments keep them from buying new units – a far cry from just a few years ago when new units were closer to $500-$600 a month. This will likely hold the price for used units steady well into 2025.
- As we predicted in Q1, patterns that form in the used market will (as they have all year) hold with used passenger and light duty units in high demand and bigger units facing an uphill battle. High quality, low mileage vehicles will continue to bring premium prices, while distressed assets will continue to flood the market for the foreseeable future.
- Conversations with industry insiders lead us to believe that roughly 360,000 used vehicles – and tens of thousands of new ones – were lost across the Southeast during hurricanes Helene and Milton, a fact that will put further stress on the used vehicle market. With somewhere north of $10 billion in losses, that’s a lot to overcome.
- Fuel prices – barring an international incident – will perform much the way they have the rest of the year: a little up, a little down, but nothing severe in either direction.
- Used semis/truck prices will continue losing value, at least until freight picks back up and the backlog of used units is sold.
- The continued consumer demand for goods and services we predicted earlier this year will not only continue, but have a positive effect on used wholesale vehicle prices for final mile delivery units and work vans for at least the next year.
- Fleets will continue to exercise caution with respect to EVs, a phenomenon that kicked into high gear at the beginning of 2024. Alternate fuels will continue to be a hot topic and play an important role for fleets looking to meet aggressive carbon mandates.
STAY AHEAD OF THE GAME, STICK WITH THE EXPERTS AT FLD!
Despite the fact that anything can happen in a world that has the capability to change in an instant, we don’t see those kinds of dramatic changes for the used white metal market as we head into the end of 2024. Instead, we predict more of “slow drip” as one of my colleagues likes to call it. A little move here. A slight fade there. Nothing overly dramatic and – as we’ve been saying all year – likely more of the same.
That said, regardless of where the white metal market is headed, one thing’s for sure. After 45 years of pioneering asset remarketing, we’re not going anywhere. And we’ll always be here for our clients, partners, and friends in fleet. Keeping an eye on the used asset marketplace. Doing our best to predict where things might be headed. And delivering real world insights that can help you run a better, smarter fleet operation.
ABOUT THE WHITE METAL MARKET REPORT and BILL BISHOP
Bill Bishop is SVP of Sales and Marketing at FLD Remarketing and with over 35 years of experience in fleet, a recognized expert in the used wholesale vehicle market. He has been authoring FLD’s quarterly White Metal Market Report for the past 8 years and can be reached with questions or comments at [email protected].
Be sure to check out our new quarterly fleet Sentiment Index, a look at how top work fleet managers feel about 7 key topics including vehicle availability, fuel prices and more. Track sentiment from quarter-to-quarter to get real world insights you can use! Go to www.fldinc.com/news to see it now.