Repossessions and liquidations of tractor-trailer trucks rose nearly 8% in 2006 compared with 2005, according to Nassau Asset Management’s NasTrac Quarterly Index.
Nassau warned that the rise in tractor-trailer repos in 2006 indicates 2007 will be a challenging year for small-to-mid-sized trucking businesses.
“Truck repossessions and liquidations have been on an upward trend for seven of the past eight quarters, and current conditions indicate this trend will continue,” said Edward Castagna, Nassau president. Castagna told FleetOwner that the number of repos have been creeping upward rather than spiking.
The collapse of the residential construction industry has hurt freight transportation, said Castagna. In Florida there appears to be a direct correlation between the decline in the residential market and the rise in truck repos. On a national level he declined to draw that conclusion, noting that repos “had some volume” in the states of Tennessee and North Carolina, in spite of their relatively strong residential markets.
On a positive note, Castagna said that demand for used tractor-trailer vehicles was stable. He said that this is because buyers are likely to avoid trucks with ’07 and newer engines, thanks to EPA’s new emission standard that effectively drive up the cost of those engines and cast a cloud of uncertainly on maintenance costs.
“We feel the [used truck] market should remain strong this year and possibly into 2008,” Castagna said.
In anticipation of low demand for ’07 engines, dealers bulked up on ’06 engine inventory. Castagna said that most dealers have an inventory of new ’06 engines that will likely last 90 to 120 days.
“It’s probably a smart move for the manufacturers to put some incentives on the brand new [‘07] trucks— that will change the dynamics of the used truck market,” Castagna said. “I understand those incentives are out there for Peterbilt dealers. Everyone is going to have to do it. They’re going to have to move those trucks.
“Once you can’t get any more [new ’06 trucks] that’s going to make used [pre-‘07] trucks much more attractive than the ‘07s,” Castagna said. “I feel prices will remain strong [for used trucks]. We may even see a little spike initially for used pre-‘07 trucks.”
To comment on this article, write to Terrence Nguyen at tnguyen@fleetowner.com
