Seesawing fuel prices proved to be a major factor behind growing repossessions and liquidations of tractor-trailers nationwide in the fourth quarter last year. The trend also contributed to a growth in truck leasing.
According to Westbury, NY-based Nassau Asset Management, overall truck and equipment repossessions and liquidations increased significantly during the first three quarters of 2005. Repos of tractor-trailer trucks rose 145% in the fourth quarter of ’05.
“We believe fuel costs in 2005 have contributed directly to the rise in truck repossessions,” said Nassau president Edward Castagna. “But it is important to note that [other] factors are also at play. Reports indicate that equipment leasing industry volume has been increasing, so that means there was more leased equipment in the marketplace in 2005 than in 2004. Naturally, there will be a rise in repossessions and liquidations when the pool of equipment in the marketplace has increased.”
On a more positive note, Richard Howard, vp for DaimlerChrysler Truck Financial, said the greater pressure on trucking operating costs coupled with burgeoning freight demand increased leasing activity for his firm – especially among private fleets.
“In our ‘vocational segment’ of the truck financing business, which for us means companies for which moving freight is not their principle business, we saw a 45% growth in our leasing transactions last year,” he told FleetOwner. “While the general freight market has been very buoyant and there’s more cash in the [truck] marketplace, leasing seems to becoming more attractive as a way better manage cash flow. It creates a fixed cost base in the face of higher costs such as fuel.”
Howard noted, too, that the volatility and cyclicality of the U.S. trucking freight market is “huge” and that managing its peaks and valleys are a tough challenge. “It is a very dynamic market, even in prosperous times, so it requires a longer-term business strategy,” he said.