An interesting story I found posted on Livemint.com yesterday brought to mind (again) the economic crisis and how it has affected all corners of the globe.
According to the article, the number of operators who are behind on payments on their trucks is growing, primarily because of deteriorating economic conditions. What’s changed, however, is the number of lenders repossessing those vehicles. It’s dropped.
““Our tolerance levels have increased as we see no point in seizing the vehicles,” said R. Sridhar, managing director of India’s largest truck financier Sriram Transport Finance Co. Ltd.
The reason for the increased levels of tolerance? The lenders can’t resell the vehicles. In fact, according to the article, many lenders are now providing loans only up to 75% of the vehicle’s cost. With a one-year-old used truck selling for just half its original value these days, it’s easy to see why.
Given the reluctance in this country of banks to foreclose on homes these days, I assume the same policies are taking place with trucks as well. According to John Schultz, an analyst with Gerson Lehrman Group, there may still be more than 25% overcapacity in the U.S. market right now.
While acknowledging that allowing people behind on their payments to keep their trucks is good for the individual, I wonder if it’s good the industry as a whole?