Schneider National’s Mike Bethea, head of the fleet’s 2,500-member owner-operator program, says its financial arm has remained strong, mostly because it’s retained stringent up-front requirements. He points to Schneider’s emphasis on strong front-end training.
“We run a cash flow with them” before they get into the business, says Bethea of first-time owner-operators. “What’s your truck payment? Do you have a truck picked out? What’s your bobtail insurance? We stress that they try to keep themselves productive. We see what their real potential earnings are.” When they sell a truck, they include a year of free service with ATBS, the owner-operator financial services provider.
SelecTrucks, moreover, with a network of used-truck dealers owned by Daimler, is utilizing Daimler Financial to move trucks with an offer of zero-down, 4.75 percent, on qualifying trucks to customers with good credit. That translates to what Daimler Trucks Remarketing Manager Drew Backeberg says is an owner-operator with a high credit score and a good borrowing history – the above-average “A or B credit” folks, as he puts it. To those with average credit, Daimler is offering a down-payment match of up to $1,750 as an option.
Qualifying trucks are 2003-’04 Freightliner Century Class and Columbia models with anywhere from 350,000-625,000 miles.
On the other hand, at least some trucking-specific capital sources are doing the same as many banks – raising interest rates. “Normally we would price within a range of about 5 percent” between the lowest and highest rate, says Trebar’s Barrett, but “now we are quoting anywhere from 9.9 percent up to 18.5 percent.”
Backeberg says truck loan interest rates have risen substantially this fall. For those with the best credit, he says, many traditional sources have been quoting 12 percent to 13 percent.
Bargains are most likely to be found in the used-truck market. “Used truck prices are lower than they used to be,” says Eric Cook of Aurora, Colo.-based Peak Trucking Consultants. That’s partly due to repos flooding the market.
Don’t look for similar bargains on orders from original equipment manufacturers. “An OEM price war is highly unlikely,” says Eric Starks, president of FTR Associates, publisher of the North American Commercial Truck & Trailer Outlook. Truck makers are not “really worried too much about their market share” and are just trying to keep their margins stable.
Truck OEMs have expanded parts and service lines to accommodate what is already a year-and-a-half slowdown in truck sales, Thompson and Starks say. “They were hoping they would have turned around by now,” says Starks. Keeping to the same pattern of low inventory, overhead and sales won’t be too much of a problem for them, analysts suggest, which means little bargaining leverage for individual buyers.
ATBS Vice President Richard DeForest characterizes the credit availability situation for responsible operators as a “temporary problem. You’ll just have to plan to work a little better, or maybe work a little more” before the economy comes back up.
“Stay productive,” says Schneider’s Bethea. “You can’t go home if the freight’s out there, because you don’t know what might happen next week.”
And when a bad turn happens, it’s not necessarily the wisest move to go deeper in debt just because you can qualify for a loan, as Kansas City, Mo.-based owner-operator Dave Smith knows. With nearly 900,000 miles on it since its last overhaul, Smith’s late-1990s Caterpillar 3406E went down in September due to a damaged cylinder. With a repair estimate of $7,000 to $9,000, and an uncertain market ahead making him reluctant to borrow money, he opted instead to flag for windmill blade haulers in a smaller truck and save for year’s end, when he’ll repair the engine.