Nassau Asset Management's NasTrac Quarterly Index reports a 110% increase in repossessions of tractor-trailers in 2007 compared to 2006. The value of the repos increased to slightly under $12 million last year from about $5.7 million the year before.
A significant portion of the jump in truck repossessions can be attributed to the decline in homebuilding, which affects many peripheral business sectors using trucks.
“From the forest to the saw mill to the construction site, along with the movement of people in and out of those homes and the delivery of appliances and furniture to the home, there are trucks involved in every step of the process,” said Nassau president Edward Castagna. “The rings continue to expand out of the housing epicenter.”
The increase in the number of repossessions can also be attributed to rising fuel costs, government regulations such as restrictions on travel time, greater competition and a greater volume of late model trucks on the market due to the '06 pre-buy, the group pointed out.
“An increase in repossessions is normal when there's a downturn in business,” analyst Chris Brady, president of Commercial Motor Vehicle Consulting, told Fleet Owner. “Freight markets have been soft and carriers' profit margins are being squeezed.
“I was talking to a small fleet recently, and he said it's brutal,” Brady noted. “A lot depends on the commodity you haul, but with higher fuel prices and excess capacity, carriers don't have pricing power and some are going under. … If you're a small carrier, a shipper has greater opportunity to replace you.”
In addition, R.L. Polk & Co. reported that registrations of new Class 8 trucks fell 37.8%, dropping to 169,000 last year from a record-high 272,700 units in 2006.
Terry Williams, editor of Truck Blue Book, told Fleet Owner that the decline in new-truck purchases hasn't had a big impact on the used truck market, as inventory has been steady. “If there's a significant number of repossessions it may have an effect, but it's not having [one] yet.”
Williams added that repossessions could start affecting the market later in the year. “[It] can absorb them to a point, but the auction business is up, which usually means a slow truck economy.”