Truck repos down, but construction repos skyrocket

Repossession figures for trucks and trailers declined by 25% in 2008 compared to the previous year, but construction equipment repossessions have increased year-over-year, according to Nassau Asset Management's NasTrac Quarterly Index (NQI)

Repossession figures for trucks and trailers declined by 25% in 2008 compared to the previous year, but construction equipment repossessions have increased year-over-year, according to Nassau Asset Management's NasTrac Quarterly Index (NQI).

The report said that the initial surplus of trucks in the marketplace due to 2007 EPA regulations has now been absorbed, but there is still a high level of inventory that could increase further due to the slow economy and the difficulty for buyers to secure credit. However, due to highly elevated truck repossessions in 2007, the 2008 totals still represented a 50% increase from 2006 figures.

Repossessions and liquidations of machine tools rose more than 150% in 2008, Nassau said, with construction equipment repossessions rising 11%. Nassau said it predicts this trend will continue for at least six to 12 months, until the Obama administration’s proposed infrastructure work begins, although “some weaker companies will not be able to survive until the infrastructure work commences.”

"While it's impossible to predict the future, it does appear this trend will continue in 2009," said Ed Castagna, president of Nassau Asset Management. "This is especially true if American automakers continue their struggles, with or without government assistance. It will also be important to see if U.S. exports decrease because of a rising dollar and if the construction market receives a boost from an injection of government-funded activity focused on improving the country's infrastructure.

"The credit market remains sluggish, and lenders are receiving mixed signals,” he added. “The Federal Reserve weekly reports show an increase in commercial and industrial loans, but those loans are being used by large companies to meet their financing needs or to have cash on hand for the future. They are not being used to generate new business activity in the leasing sector and elsewhere."

Nassau added that McGraw-Hill Construction forecasts a 7.4% decline in construction starts in 2009, after declines of 12.4% in 2008 and 8.0% in 2007. In addition, scrap steel prices have dropped to their lowest levels in nearly five years after hitting record highs a few months ago, the index said.

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