Repos feeding used-truck market

Repos feeding used-truck market

High commercial truck repossession rates over the past five quarters have been helping fill the trucking industry’s strong demand for used equipment, reports credit firm Nassau Asset Management

High commercial truck repossession rates over the past five quarters have been helping fill the trucking industry’s strong demand for used equipment, reports credit firm Nassau Asset Management. The high repo rate gleaned from Nassau’s NasTrac Quarterly Index, combined with quick turnarounds of repossessed trucks and strong new truck sales is indicative of lots of equipment changing hands and therefore a strong market, according to a Nassau executive.

Truck repossessions and liquidations began to climb in the first quarter of 2005 after two years of relatively low volume, Nassau said. Comparing each quarter with the previous one, they rose 61% in Q1 2005, 30% in Q2 2005 and 32% in Q3 2005 at their 2005 peak.

Although truck repos dropped 118% in Q4 2005 compared with the previous quarter, the volume was actually 145% higher than the same quarter last year. Truck repossessions in Q1 2006 increased 40% over the previous quarter.

“The increase in repossession activity is directly related to the increase in new truck sales,” Edward Castagna, Nassau’s executive vp told FleetOwner. “I think it’s a sign of health because they’re selling the trucks right away.”

One possible factor affecting the repo rate is the impact of high fuel prices on owner-operators.

“I think [owner-operators are] feeling the most pressure from several different aspects, namely insurance costs, fuel costs and restrictions on driving time,” Castagna said. “They may not have the A-1 credit that the big trucking companies have and they’re paying a little more for everything.”

But overall, Castagna believes the trucking industry has fully recovered from the economic woes it suffered after the dotcom bust, 9/11 and the following downturn.

As a credit firm, Nassau tracks indications of carriers pre-buying trucks to avoid the more technically complex and higher initial costs associated with ’07 truck models.

“A fleet, instead of exercising the buyout of their lease, may prefer to get a new truck,” Castagna explained. “Fleets are exercising any new opportunity [they] have to buy new trucks. It’d make perfect sense to take a low mileage truck and decide to take the purchase option, but in this case they’d prefer to get a new truck to avoid getting a new ’07 engine.”

TAGS: Operations
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish