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Fleetowner 1056 Linetruckssm

Truck repossessions more than double in ‘07

March 20, 2008
Nassau Asset Management’s NasTrac Quarterly Index (NQI) reports a 110% increase in repossessions of tractor-trailers in 2007

Nassau Asset Management’s NasTrac Quarterly Index (NQI) reports a 110% increase in repossessions of tractor-trailers in 2007 compared to the previous year. Repos increased from about $5,700,000 worth to slightly under $12,000,000, the company said.

The decline in homebuilding has been seen as major factor in the increase in truck repossession, as it affects many peripheral business sectors that utilize trucks, Nassau said.

“From the forest to the saw mill to the construction site, along with the movement of people in and out of those homes and the delivery of appliances and furniture to the home, there are trucks involved in every step of the process,” said Nassau president Edward Castagna. “The rings continue to expand out of the housing epicenter.”

Other reasons for increased repossession include government regulations such as restrictions on travel time, rising fuel costs and greater competition, as well as an increase in late model trucks on the market due to the ’06 pre-buy, Nassau said.

“An increase in repossessions is normal when there is a downturn in business,” analyst Chris Brady, president of Commercial Motor Vehicle Consulting, told Fleet Owner. “Freight markets have been soft, and carriers’ profit margins are being squeezed.

“I was talking to a small fleet recently, and he just said it’s brutal,” Brady added. “A lot depends on the commodity you haul, but with higher fuel prices and excess capacity, carriers don’t have pricing power and some are going under….if you’re a small carrier, a shipper has greater opportunity to replace you.”

In addition, R.L. Polk & Co. recently reported that registrations of new Class 8 trucks fell 37.8% from the previous year, dropping from a record-high 272,700 units in 2006 to 169,000 last year.

Terry Williams, editor of Truck Blue Book, told Fleet Owner that less new trucks purchased has not had a large effect on used trucks, as inventory has been steady. “If there is a significant number of repossessions, it may have an effect, but it’s not having an effect on the used market yet.”

Williams added that repossessions could start affecting the market later in the year. “The market can absorb them to a point, but the auction business is up, which usually means a slow truck economy,” he said.

R.L. Polk also reported that the number of Class 8 vehicles rose 2.2% in the past year, after truck manufacturers sold 150,965 Class 8 vehicles in 2007, the lowest number since 2003 and a drop of 46.8% from 2006.

Nassau calculates the top five repossessed capital assets, which in addition to trucks are printing, medical, machine tool, and construction. According to the group, all but trucks and medical equipment declined significantly in 2007.

According to Castagna, the decline in construction repossessions and liquidations by 32% was due to the continued strength of the commercial construction industry, although the second half of the year showed signs of trouble.

“We are seeing a very significant correction in the market,” he said. “Even in a category such as construction equipment, where the 12-month total showed a decline, repossessions were up significantly in the second half of 2007.”
About the Author

Justin Carretta

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