Key Takeaways for Decision Makers
INSURANCE: In 2014 there was a volume distribution change between sleepers and non-sleepers for 2012 models resulting in an increased depreciation rate. The same is beginning to occur to the 2013’s now in Q1 2015.
How does the distribution of the on-highway heavy duty commercial trucks between day cabs and sleepers’ impact pricing? In a quarter over quarter comparison, there was an evident shift during Q1 of 2015 in the number of day cabs compared to sleepers for a number of model years, but especially for the 2009 and 2010 models. In Q1 2014 where the majority of 2009 models were still sleeper cabs, the year over year depreciation for the quarter was at 7% whereas the depreciation slowed down to 5% going into 2015. The day cab tractor prices were more heavily impacted by this shift though. The 2009 non-sleepers were down only 5% between Q1 2013 and Q1 2014, but dropped 26% between 2014 and 2015. The shift in availability certainly influenced the pricing as the number of 2009 day cabs were only slightly up in 2014, the sleepers jumped drastically. In 2015 however, the sleepers went back down in volume while the number of day cabs more than doubled since 2014. The market share shift on 2009’s between sleeper and day cabs was not due to an increase in one while the other remained stagnant, but instead was caused by a change in both cab types going different directions.
There was a similar shift in 2010 models between 2014 and 2015, but with slightly different volume trends. In 2013, there were triple the number of sleepers than day cabs available. Q1 2014 showed a significant increase in the number of sleepers whereas the amount of day cabs available was only up slightly causing the difference to become more drastic, but both did see increases in 2014. There was another increase in the number of day cabs in 2015, but this time at a much larger scale. Following in suit with the 2009’s, there was a drastic drop in the number of 2010 sleepers in 2015. There was almost double the amount of day cabs than sleepers on 2010 models during Q1 2015, which is a drastic change in comparison to Q1 2014. The impact this had on the depreciation rate with such a difference in volume year over year was also evident. With more sleepers than day cabs on the market during 2014, the depreciation from 2013 on day cabs was 18% while sleepers was only 9%. While 2015 saw a shift in market volume, the depreciation on sleepers slowed down to 6% as the availability lessened. The number of day cab 2010 models was at its highest for the 3 years during Q1 2015 still showing a higher depreciation than the sleepers, but at a slightly higher rate than the previous year.
The 2012 models had an interesting distribution change between 2013 and 2014. In 2013 the 2012 models were primarily day cabs, which would be expected considering their age at this point. Then by 2014, there were almost 3 times the number of sleepers than non-sleepers on the market. There was another slight increase in the amount of sleepers over day cabs in 2015. Year over year, 2012’s continued to increase in volume, but the story lies behind sleeper cabs increasing at a much higher rate than day cabs. This again had an impact on the depreciation rate for both types of heavy trucks. In 2014, the 2012 models were down 27% from 2013 due to the increase in volume shifting the market. The depreciation after this occurrence was only 13% between 2014 and 2015. Even though the volume itself was up, in relation to the total number of heavy duty 2012 models on the market there was not a significant change between Q1 2014 and Q1 2015. The day cabs showed an increase in depreciation as their market distribution was down. The depreciation rate between 2013 and 2014 for the day cab 2012 models was 18% after losing a large amount of market share, which was much lower than the sleeper rate. The increases in day cab during 2015 did not shift distribution due to the large increase in sleeper volume, but the depreciation rate did increase to 21%.
This goes to show that as the number of trucks entering the market, the depreciation begins to increase because in order to sell the piece of equipment with so many available for purchase there must be a competitive advantage. The shift in volume distribution is more highly related to age than actual model year. This means that between ages one and two years there is a distribution change then again between 5 and 6 years of age. At ages 2-4 there are generally more sleeper cabs on the market than day cabs. At ages 6 there appears to be more day cabs while the decision is split at 5 years of age. This is evidently the point in time that the shift is occurring.