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Used Truck Prices Continue to Skyrocket in 2021 – Here’s Why

The market for used trucks has hit one of its highest points in history—with no sign of slowing down.

ACT Research reported that in March the average used Class 8 truck brought the third-highest price on record, jumping to $52,388 per sale from $43,791 just a year before. The all-time high of $55,000 was recorded in 2015 and may be in jeopardy over the coming months and years. Technavio, a global technology research company, estimates that the used truck resale market will expand at a compound annual growth rate of more than 4% between now and 2025.

But what’s driving this growth, and why do experts believe it will continue for the immediate future? Let’s look deeper at this explosive growth in used truck prices.

A Shortage of New Trucks

The COVID-19 pandemic created shortages and delays throughout the supply chain, including the raw materials and parts needed to build new Class 8 trucks. Meanwhile, demand for new trucks continues to rise. FTR Transportation Intelligence reported that more than 42,800 new trucks were ordered in January, up 144% from the year before.

With more trucking companies looking to purchase vehicles and manufacturers unable to keep pace, the secondary market for used trucks has increased. There is hope, however, that as the pandemic fades away, the supplies needed to build new trucks will return to normal levels—but it may take some time for the price of used trucks to recover.

Strangely, it’s one of the smallest components that’s holding up production. A shortage in the semiconductor supply chain has reduced the availability of computer chips, which are used in both tractors and passenger vehicles. The average tractor can use anywhere between 15 to 35 chips, but pandemic-related slowdowns, two factory fires, and congested West Coast ports have greatly decreased availability.

While things like wiring harnesses, foundry parts, axles, or tires can be added after a truck is assembled, a lack of microchips can slow the entire assembly. These challenges combined with increases in new orders have created an unbalanced market.

As of March 1, the reported backlog of trucks ordered and waiting to be built stands at 228,000. At the current build rate, it would take almost a year to simply clear the backlog if no other orders were placed. Part of that problem is also staffing. The COVID-19 pandemic impacted the ability for manufacturing workers to be on-site, resulting in a labor shortage.

The Benefits of Used Trucks

Auction and retail prices for late-model, low-mileage used trucks, in particular sleep truckers, are up. These models are at their highest point since J.D. Power began tracking the segment in 2015. Used trucks tend to hold their value more than other vehicles as drivers must adhere to strict standards to stay on the road. A lot of truckers also invest in their vehicles, adding amenities once they own the truck—both to make it more comfortable while on the road and to increase potential resale value.

According to J.D. Power, the average sleeper tractor retailed in March was 68 months old and had approximately 458,000 miles on it. Its selling price of $57,489 cost almost 30% more than just one year ago. Due to new truck shortages, companies that traditionally cycled trucks out on a three-year or five-year cycle may hold on to them longer, further reducing the availability of used trucks.

High Demand + Low Supply = Pricey

The need to carry freight has remained strong, and trucking companies with staffed drivers on the road can start charging higher fees. Those extra funds could, in turn, be used to purchase more expensive vehicles if and when they become available.

Contract freight rates are near record levels, as are spot rates, after season adjustment. This has been exacerbated by people leveraging online ordering and delivery, along with the distribution of stimulus checks that provided many families with additional income.

That said, the trucking industry as a whole finds itself in an odd predicament. There is a strong need for drivers and trucks but not enough of both. Companies and owner/operators will have to decide if they want to invest in a newer used vehicle, make improvements to their existing ride, or get in line for a new truck now. With the end of the pandemic hopefully in sight, there is hope that the production of new trucks can increase in the coming months.

Parking Shortage: An Unexpected Problem for Truckers

The COVID-19 pandemic has increased attention on the already growing need for more truck parking as trucking advocates push for federal funding to alleviate the problem. The need for safe truck parking existed before the pandemic, fueled largely by the electronic logging device (ELD) mandate that more strictly regulates the length of time drivers can work. With traditional truck and rest stops filling up quickly, truckers find themselves now parking in abandoned parking lots, on shoulder highways, and other dangerous locations.

A Rapidly Growing Problem

A 2019 survey showed there were about 313,000 truck parking spaces across the country. This included about 40,000 at public rest areas and another 273,000 at private truck stops, numbers that increased from just five years earlier (the number of public rest area spots grew 6%, while private spots were up 11%). However, the same survey found that 98% of truckers interviewed still had trouble finding safe parking at the end of their day.

This was, of course, before the pandemic started. Some private truck stops further curtailed parking to reduce the number of people on their property to limit virus exposure, and public rest stops became crowded as more people traveled in recreational vehicles to avoid air travel and public transportation. Before the ELD mandate, truckers could simply continue to travel until they found a safe location, usually away from a major metropolitan area.

Now truckers must either commit valuable driving time to planning where they will spend their night or drive around in hopes of finding a safe space to sleep. Some truck drivers have resorted to staying in unsafe locations to avoid fines and penalties for logging too much time behind the wheel. While some mobile applications have been created to help solve the problem, the reality is there are simply not enough available spaces for truckers currently on the road.

Is There Help in Sight?

Maybe. There was initial hope that funding could be included in the upcoming $1.9 trillion COVID-19 relief bill but that did not happen. Instead, the best hope for trucks is an infrastructure bill Congress will debate later this year.

Peter DeFazio, a Democrat representative from Oregon who chairs the House Transportation and Infrastructure Panel, has vowed to push for truck parking when the discussion begins on a highway bill to replace a transportation bill passed in 2015 that expires this October. DeFazio included $250 million in an infrastructure bill last year to improve truck parking, but that measure never received a vote in the Senate. Other politicians, including Mike Bost, a Republican representative from Illinois, have proposed similar measures to increase parking options for truckers.

Bost, who comes from a family of truckers, introduced a measure for the COVID-19 relief bill that would dedicate $125 million to truck parking this year, a number that would increase each year through the 2025 federal fiscal year. In the end, $755 million would have been provided to help truckers. While this measure was tabled, it provides a potential outline for what relief could look like.

The Federal Highway Administration has taken note of the problem; through the National Coalition on Truck Parking, the agency will seek to obtain initiatives that will improve parking for commercial truck drivers.

Trucking advocacy groups argue that airlines, Amtrak, and other transportation industries have received billions of dollars in aid during the pandemic, truckers have largely been ignored. The goal is for funding to create additional parking areas and forbid rest areas from charging truckers to park.

The Risks of Not Expanding Truck Parking

The trucking industry seemingly has more trucks than drivers these days. While trucking has shown to be a valuable profession, especially during the pandemic, the stressful nature of the work has led to decreased driver retention.

Truck drivers already work long hours, spend days and weeks away from loved ones, and must follow strict workplace safety guidelines to keep themselves and the roads safe. While a driver may be unlikely to leave the profession over the lack of parking alone, the daily stress of finding a spot may contribute to an overall negative feeling for the job.

The pandemic has highlighted the value of truck drivers who have worked in difficult conditions to continue delivering goods. For many, they could not even use a bathroom at their distribution center for fear of spreading the virus.

Lewie Pugh, executive vice president of the Owner-Operator Independent Drivers Association, summed up the increasingly complicated issue from a trucker’s standpoint.   

“All truckers want is a place to take a nap,” he said, according to Roll Call.

Employment Challenges Facing the Trucking Industry in 2021

Employment Challenges Facing the Trucking Industry in 2021

The COVID-19 pandemic continues to highlight the sheer importance of long-haul drivers in the United States as record unemployment in the trucking industry leads to disruptions in supply chains nationwide. Namely, these unemployment rates resulted in a critical driver shortage in the industry, forcing carriers to increase their spot rates. According to Business Insider, when carrier rates increase, retailers tend to pass the transportation costs down to consumers. During the last driver shortage, Amazon raised their Prime membership price by $20. Clearly, a driver shortage affects more than just the trucking industry. 

As we move forward in 2021, the trucking industry needs to address the long-lasting challenges presented by the COVID-19 pandemic in order to improve driver employment levels and avoid further turmoil. 

Where did all of the Truck Drivers go?

One of the main factors leading to the shortage of long-haul truck drivers is the global economic recession. At the height of the COVID-19 pandemic, the trucking industry saw record unemployment rates, with over 88,000 jobs lost in April alone, according to the Bureau of Labor Statistics. While unemployment rates have improved since April, the U.S. unemployment rate currently hovers around 6.7%—the highest it’s been in years. 

Some carrier companies have since closed down their operations permanently due to decreased demand and increased driver costs. Government-mandated social distancing measures imposed on those remaining carrier companies negatively impacted productivity and further limited the need for truck drivers. 

Increase in Unemployment Benefits

Due to the drastic increase in unemployment, the United States government passed legislation that increased unemployment benefits and provided stimulus payments for Americans. Many older drivers decided to protect their health by accepting the unemployment benefits, rather than travel the country and put themselves at risk of infection. 

For a while, the increased benefits actually provided unemployed drivers with nearly comparable salaries to what they would be making while fully employed, disincentivizing them from returning to the workforce right away. Hundreds of owner/operators even received federal PPP loans to keep them afloat without having to work during the pandemic. As for what’s next, President-elect Joe Biden has his own plans for economic relief packages, including a boost in unemployment benefits that will certainly impact the trucking industry. 

Early Retirement

Not only is the pandemic responsible for widespread unemployment throughout the trucking industry, it also pushes many older drivers to cash in on their retirement early. According to a study published by the National Center for Biotechnology Information, long-haul drivers are an especially high-risk population, stating, “The unique co‐occurrence of pronounced health disparities and known COVID‐19 infection, morbidity, and mortality risks suggest the possibility of a novel COVID‐19 based truck driver syndemic due to advanced driver age and endemic health issues.” Many older truckers decided to protect their health and retire early amid pandemic fears, and it will take a new incoming group of truck drivers to fill the vacancies. 

CDL School & DMV Closures

COVID-19 forced many small businesses to shut down, both permanently and temporarily. CDL schools across the country have had to close their doors, significantly impacting the ability of prospective new drivers to obtain their CDL. Further complicating matters is the fact that at the height of the pandemic, over half (27) of states closed their State Driver Licensing Agencies (SDLA) while the remaining 23 states operated at limited capacity, severely slowing down processes. 

The pandemic has had such a great impact that the Commercial Vehicle Training Association (CVTA) proposed governors “enact executive orders to recognize CDL training schools and SDLAs as ‘essential services’ while also granting the Secretary of Transportation temporary authority to also administer CLP or CDL testing due to SDLA closure.” CDL school and SDLA closures also put a pause on the training and licensing of an estimated 25,000 to 40,000 new drivers. Many states and localities continue to impose their own restrictions and lockdowns, making it difficult for new drivers to obtain their CDLs and join the depleted workforce. 

The Drug and Alcohol Clearinghouse

In January 2020, the government made it mandatory for all long-haul drivers to report to the Drug and Alcohol Clearinghouse for centralized management of driver substance abuse records. Any drivers violating the DAC’s substance abuse policies are immediately removed from the road, and their infractions are documented for five years for current and future employers to access. Drivers can return to the road upon completion of proper DAC return-to-duty protocol, including meeting with a substance abuse professional. 

In 2020, the DAC removed more than 50,000 drivers for substance abuse infractions; less than 10% of “early violators” have returned to the workforce. This means the trucking industry can expect to lose around 50,000 jobs annually due to substance abuse, which would be a huge burden on supply chains across the country. 

The trucking industry has been hit hard by COVID-19, experiencing record unemployment rates and a driver shortage across the industry. Along with other repercussions, carrier companies now face difficulties finding and retaining high-quality drivers, leading to disruptions in supply chains. In order to minimize costs and keep the industry afloat, there will have to be new, innovative ways to attract quality drivers and meet the growing transportation demand.

4 Industry Trends to Watch in 2021: The Rise of New Technology in Transportation

Mercedes Future Truck

As the coronavirus took its toll on the world in 2020, some industries—like the hospitality sector—were deeply impacted as government-mandated restrictions and virus-related fear prevented restaurants and bars from operating at maximum capacity. E-commerce, on the other hand, saw an enormous surge in demand with companies like Walmart and Amazon seeing record levels of revenue during the pandemic. The trucking industry, too, was not insulated from the impact of the pandemic. Large numbers of jobs lost and new challenges on the roads forced the industry to quickly adopt innovative new technologies in order to overcome the impact of the pandemic. Here are four technology trends emerging in the trucking industry that owner/operators should keep an eye on in the coming months.

1. Autonomous Vehicles

Almost straight out of a science-fiction movie, autonomous—or self-driving—vehicles are becoming a reality as manufacturers like Tesla begin producing more autonomous consumer vehicles. The trucking industry has become an early adopter of autonomous technology for their freight shipments due to an increased demand for shipping and a shortage of long-haul drivers—caused by economic instability and the tough nature of the trucking industry. Autonomous trucks manufactured by Waymo are already in use on the roads today in California, Arizona, New Mexico, and Texas, and Waymo has plans of expanding into more states in the future. Proponents of autonomous vehicles argue that self-driving semi-trucks will eliminate human error behind the wheel, lower costs of shipping, and increase efficiency across the board for trucking companies. There is some trepidation about turning toward autonomous vehicles; some worry about accidents caused by self-driving trucks while others worry about the loss of critical jobs due to the addition of autonomous vehicles. If companies begin turning toward utilizing their own autonomous vehicles, it could have a negative impact on the number of available trucking jobs. 

2. Smart Technology

Another important trend to watch out for in 2021 is the use of new and improved technologies to optimize the efficiency of long-haul shipping. Smart technologies on trucks improve safety for lane departure detection, lane keep assist, assisted braking, tire pressure monitoring, and even load stability. Furthermore, logistics companies are utilizing new technology for enhanced tracking and reporting to minimize human error and to have a better grasp of where their freight is at all times. The improved tracking is beneficial for planning when truckloads can be dropped off and picked up, as well as for providing customers with accurate updates. Alongside this technology, owner/operators can use new technology to locate cargo while on the road to reduce the amount of time spent on the road with an empty truck. With freight matching technology, drivers can ensure their trucks are always full and they are maximizing revenue capabilities at all times. 

3. Data Analytics

Data analytics has made its way into pretty much every industry, from marketing to manufacturing to the trucking industry. Owner/operators use analytics to capture important data pertaining to their cargo, their trucks, and their routes; using this data, they can make valuable improvements to their performance, thus saving time and money and even helping them to drive more safely. According to Transmetrics, one study conducted by Supply Chain Management World found that “64 percent of executives think that big data and the insights it brings will have a disrupting power that can pivot the industry forever.” Data analytics also provide valuable insights into freight markets that help owner/operators uncover trends and patterns in the industry to pinpoint new opportunities and improve existing ones. 

4. Electric Trucks

Electric trucks are making their way into the freight industry. Tesla already designed an electric semi-truck that can travel almost 500 miles on a single charge, and in 2019, Neuron EV released the TORQ, a fully electric semi-truck. With rising fuel costs, electric trucks can save owner/operators money in the long-term, improving their overall bottom line. Additionally, electric semi-trucks are much better for the environment, and companies have begun employing electric trucks to lower their carbon footprints. While electric trucks will not be replacing your entire fleet right away, they might eventually as states like California begin passing legislation to crack down on carbon emissions produced by the trucking industry. 

As truckers begin preparing for 2021, it’s important to embrace the new technologies that are changing the long-haul industry for the better. While the trucking industry isn’t going anywhere, we’re seeing the emergence of new technologies that can benefit both drivers and carriers. Autonomous vehicles, smart technology, data analytics, and electric vehicles are reshaping the modern trucking industry, making the job easier, more accurate, and safer along the way.

Why Owner/Operators Should Run Hard This Holiday Season

There is no doubt that the COVID-19 pandemic has had an impact on the vast majority of industries throughout the country; the freight industry is no different. Currently, carrier rates are skyrocketing, surpassing the all-time high for rate prices several times throughout the course of the year. As we enter peak freight season, now is the time for owner/operators to run hard in order to maximize revenue and take full advantage of a unique holiday season where spot rates are at record highs. Traditionally, owner/operators tend to work fewer hours when carrier rates are at their highest. With higher rates, drivers are able to reach their financial goals faster, using the extra time to catch up on rest or family time. A little downtime will always be a good thing, but this holiday season is shaping up to be different; rather than take time off, more and more owner/operators plan to run hard through the new year for multiple reasons.

Possible Country-Wide Shutdown

As COVID-19 infection numbers throughout the United States spike to global highs and the country prepares for a shift in leadership, the economic uncertainty in the air is palpable. The transition from President Trump to President-Elect Biden brings with it a new plan for combating the pandemic, which could mean another country-wide shut down. In November, the president-elect’s coronavirus advisors proposed a plan to shut the country down for four to six weeks at the start of the new year to combat the virus. Shutting down the country has a very real impact on the trucking industry, and owner/operators should understand the possible impact a shutdown could have on business and revenue streams.

Increased Wait Times for Pickup and Dropoff

While on the road, a driver’s livelihood depends on their ability to drop off one load and pick up another quickly and efficiently. Turnaround time for freight drivers makes the difference between a successful season and an unsuccessful one. During the first shut down, many truckers faced drastically increased wait times at pick-up locations due to social distancing measures and decreased on-site staff. For drivers, every hour is valuable and when they spend more time waiting they spend less time driving, or worse, less time resting—a tired driver is a dangerous driver. Ultimately, the increased time waiting leads to less time spent driving and loss of revenue. If another shutdown is on the horizon, owner/operators should use this peak season to prepare their finances to account for delayed travel times or anticipated time off if necessary.

Closed Towns and Changed Routes

These increased wait times weren’t even the worst problem many drivers faced. Many of the towns, businesses, and rest stops long-haul drivers rely on closed as well, leaving drivers with few, if any, options along their routes. Long-haul life can be daunting and dangerous, and with limited access to clean and safe rest stops and restrooms, a shutdown would severely impact a driver’s quality of life while on the road, forcing some to make the decision to avoid those routes completely. When drivers are forced to change their routes navigating unfamiliar routes can lead to increased time on the road, unsafe conditions, and even delays in shipments costing drivers valuable time and money in the long run.

Possible Increase in Industry Unemployment

In the event of a second shutdown, owner/operators should be financially prepared to take time off of work. The first shutdown led to record unemployment rates in the trucking industry, with 88,000 people losing their jobs in the month of April alone. The previous record was set in April 1994 when 49,000 people in the industry lost their jobs. While unemployment numbers have gone down, the industry still faces the very stark reality that a second shutdown could have comparable effects. Owner/operators should take this opportunity to build a nest egg for their families while rates are at their highest and opportunities are available—before the new year brings further uncertainty to the United States economy.

Record High Rates

Even if the country doesn’t enter a second shut down, freight rates will likely never reach today’s record prices again. In October 2020, dry van spot rates were 60 cents higher than in October of 2019—a 30% increase year over year. This rise in prices is only expected to continue through the holiday season as e-commerce sales soar, making this the perfect time to execute one last push before 2021 brings unpredictability and doubt. With the inevitability of either a second shutdown or prices returning to industry norms, owner/operators don’t want to miss out on the current gold rush happening in the industry.

Whether the country faces another lockdown or not, the rates are bound to return back to normal early in 2021. Many owner-operators understand the importance of the next few weeks to reaching their financial goals for the year. As we enter the high-demand holiday season, driver’s should run hard to maximize their annual revenue before the start of the new year.

How Truckers Can Prepare for the Holiday Season Amid COVID-19

How Truckers Can Prepare for the Holiday Season Amid COVID-19

Days are becoming colder and shorter, festive lights are appearing on every street, and fleets of semi-trucks are working to move holiday goods in tandem with their essential deliveries. This peak season, you can anticipate a 10-20% increase in your mileage as you travel the U.S. to transport products and meet high consumer demand. The combination of demand, winter road conditions, and the restrictions of the COVID-19 pandemic can lead to truckers feeling more pressure than usual.

Not to mention, this year, companies like Amazon and UPS plan to fill over 100,000 seasonal distribution jobs throughout the United States. As these large retailers hire seasonal workers, the demand for shipping providers will mirror the growth—which means you need to prepare yourself and your rig before starting on a busy haul during peak season. In this blog, we will discuss how you can prepare, get ahead of your competition, and reach your maximum earning potential while staying safe and enjoying the holidays.

1. Preventative Maintenance

Caring for your rig is crucial to the survival of your operations. A great way to start the caretaking process and prepare your truck for peak season is through preventative maintenance. If your truck has recently been idle for an extended period, you could be looking at rusted parts, sludge where there once were fluids, and other potentially critical issues. With the holiday season approaching, take your semi to a mechanic to perform a full inspection; they can then handle any necessary maintenance, like an oil change or hose replacement. While this may seem like a costly process, it could mean the difference between a successful season and a broken-down rig. In the long run, taking care of your truck will keep you safe and your truck running smoothly all season long—which means more jobs and greater revenue.

2. Vary Freight Sources

When COVID-19 forced America to shut down, around 88,300 drivers lost their jobs in April alone. This hit was devastating to the trucking industry, and it caused many owner/operators to reevaluate how they run their fleet. As technology progresses, mobile apps and load boards are on the rise in popularity among drivers. A source like DAT keeps up with the industry’s varying factors, like the economy or the weather. Technology can also provide real-time updates and insights to keep you in touch with your supply chains and help obtain your maximum earning potential.

On top of mobile apps and load boards, you can work with companies like Amazon, Walmart, Target, and more. As e-commerce demand sets new records year after year, the holiday season continues to see spikes in spot rates as companies meet their contract limitations but rush to keep up with shipping demands brought on by the COVID-19 shutdown. Spot rates have hit a record high of $2.37 per mile this year and will most likely surpass that number in these next few months. Keep an eye out for these job openings over the next couple of months.

3. Revisit Your Insurance

Another way to prepare for this unique holiday season is to revisit your insurance. The COVID-19 pandemic brought immeasurable amounts of uncertainty, and it’s during times like these that insurance becomes crucial. While commercial trucking insurance is one of the more expensive components of owning and operating, it reduces the majority of your expenses and covers you in the event of an accident. With the winter weather bringing harsh weather conditions, your chances of an accident increase, making peak season the perfect time to reach out to your provider and reevaluate your damage and rental coverage.

4. Practice COVID-19 Protocol

Possibly the more obvious way to prepare for the COVID-19 holiday season is to familiarize yourself with the standard protocol. As you travel, you’ll find yourself in unfamiliar locations; plan your route by keeping in mind where you can eat, sleep, and refuel. Restaurants and fast-food locations across the country have had to change their operation hours, so you’ll need to consider that when planning your route. On the bright side, some of these restaurants are providing discounts and other offers for the inconvenience. These can be found under the International Franchise Association at franchise.org.

The same restrictions and benefits go for accommodations as well. Try to limit your exposure by decreasing the number of times you interact with frequently touched objects and disinfect these objects and surfaces when you can. Stay socially distanced from others during stops or when loading and unloading, and use a proper face covering in public. Wash your hands after visiting a location or handling items like clipboards or other frequently touched objects. To keep up with state and local regulations, use government resources like the CDC, ATA, CVSA, FMCSA, FHWA, and the SBA.

Now that you know what it takes for a successful peak season, it’s time to get to work.

While this year has higher shipping demands due to COVID-19, the holidays have always come with their own set of challenges. Read our post, How the Holiday Season Impacts the Trucking Industry, to see what obstacles the holidays present and how to overcome them.

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