EPA emission rules boosting truck leasing and financing

A DaimlerChrysler finance executive said commercial truck financing and leasing options are growing in popularity as trucking companies seek to better-manage their cash flow

A DaimlerChrysler finance executive said commercial truck financing and leasing options are growing in popularity as trucking companies seek to better-manage their cash flow as they weather major technological changes in diesel engines with cleaner emission standards in 2007 and 2010.

Richard Howard, vp at DaimlerChrysler Truck Financial, expects Class 8 sales to be off 40% by the end of 2007 compared to 2006— a prediction that’s consistent with that of most trucking experts.

“We knew this truck sales drop was coming,” Howard explained to FleetOwner at a meeting here at DaimlerChrysler’s Washington, DC, offices. “The key now is how we respond to the challenges this market is presenting us now, in real-time, while still keeping our eyes on the horizon. The U.S. portion of the global truck market has the most significant cycle changes, with high highs and low lows. It’s definitely not the business for the faint-hearted.”

Howard believes that the turbulent swings in Class 8 sales brought on by mandated emission technology changes are forcing many in the U.S. trucking market to re-examine their business models.

“Everyone is scrutinizing their operating structures to focus on cash flow,” he said. “In the trucking business today, you can be profitable, yet still run out of money. That’s why we think we’ll see more use of financing and full-service lease options across the board in trucking– among owner-operators, fleets large and small, even vocational operators– because they all want to find a way to established fixed costs where they can.”

Small carriers especially will need to free up cash as they sharpen their bottom line to compete against bigger and bigger competitors, Howard said.

“Take the leasing option, for example: Paying a fixed price for your assets along with a guaranteed buyback at the end of the lease is going to fulfill a really acute need for smaller fleets out there,” he explained. “Bigger carriers tend to have more access to capital resources than smaller firms. That’s why smaller carriers really need to find ways to optimize their cost structure in the future.”

He expects demand for both leasing and financing to increase well into 2008.

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