Tight lending environment pressures transportation market

Continued tightness in the transportation lending market is a concern for dealers and auctioneers ahead of the new model year. 

While the transportation industry still needs to flush inventory out of the used and auction market, the inability to secure financing keeps the market stagnant, Sandhills Global Equipment Lease and Finance Manager Jim Ryan told Equipment Finance News.   

“We’re still to a point to where we need to get a lot of stuff liquidated out of that transportation market, but the year-over-year values are playing a significant role,” he said. “A lot of that’s directly correlated the financing aspect. It has become extremely tight, obviously, on the transportation side and having restrictions on what they’re willing to lend on … it has become extremely tough on that side. 

While some dealers, such as Premier Truck Group, experienced strong used retail sales, the potential of more inventory entering the market as the new model year begins remains a concern, Ron Long, president and chief executive at the Dallas-based firm, said during the ACT Research seminar in Columbus, Ind., last week. 

“What always keeps me up at night is looking to, is there a wave of inventory that’s going to enter the market,” Long said. “As we’ve seen some of the larger fleets structure their orders to take more trucks on the site, that could create a lot of trade-in, either trade-in activity to us or fleet selling their own trucks, but it’s inventory into the market. We see a lot of inventory coming in, which takes that consistent pricing message we had and throws it on its end.” 

Premier Truck Group sells an estimated 1.3 used trucks per customer, as the dealer’s used truck sales primarily go to one-truck purchasers rather than fleets, Long said. 

Continued tightness across industry 

The tightness in the transportation industry continues to affect customers in every credit level as lenders manage their portfolios following pandemic-era inventory issues, Long said. 

“There’s a heavier preponderance of subprime in the in the lending mix right now, just because of the environment,” he said. 

Despite the need for relief in the transportation sector, lending is unlikely to improve ahead of the presidential election, Sandhills’ Ryan said. 

“There’s one a lot of lenders that have either tightened up or just walked away from it for the time being, so you’re going to continue to see that [until we] get through the election year and see where things go,” he said.  

Used transportation values mixed 

Retail, or asking, and auction values for used heavy-duty trucks remain down year over year, but improved month over month in July, with asking values declining 16% YoY and rising 1.4% MoM while auction values fell 17.5% YoY and rose 2.2% MoM, according to Sandhills. Inventory for used heavy-duty trucks ended several months of increases in July, falling 3.95% YoY and 1.57% MoM.   

Retail values for used semitrailers decreased 18.7% YoY in July, but increased 0.7% MoM, with the downward trend likely to continue, according to Sandhills. Auction values were down 18.3% YoY but up 1.4% MoM. Inventory for used semitrailers increased 30.5% YoY and 9.1% MoM, continuing their upward trend. 

Values for used medium-duty trucks continued their monthly trend of declining, with retail values down 12.9% YoY and 1.3% MoM in July, while auction values fell 18.3% YoY and 4.1% MoM, according to Sandhills. Inventory for used medium-duty trucks finally fell in July after five months of gains, with inventory still elevated 20.9% YoY despite declining 2.8% MoM. 

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