Lenders tighten credit standards for owner-operator truck purchases as market softens

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Updated Jul 20, 2019

Owner-operators hoping to purchase a truck likely will now face new hurdles, as lenders in recent weeks have begun stiffening credit standards for equipment purchases, especially for one-truck operators, says Rob Misheloff, founder of equipment leasing and finance brokerage SmarterFinanceUSA.

Lenders’ moves are the latest shift amidst a cooling truck market, with 2019 ushering in a freight slowdown and cheaper rates, especially on the owner-operator-heavy spot market. What’s more, some analysts predict that the Class 8 sales market is nearing a cliff, coming after record-setting order numbers in 2017 and 2018.

Misheloff works between buyers and lenders to find financing for equipment purchases. What was recently a hot market — lending to owner-operators for truck purchases — has dried up, he says. “There was a boom for smaller carriers. Small, private lenders had an appetite” to sell those loans, says Misheloff.

Recently, however, he’s having trouble finding lenders that will work with single-truck owner-operators, with many requiring buyers to operate at least three or five trucks before they’ll issue a loan. Other lenders have tightened standards around truck age and mileage, he said, requiring operators to buy newer models with fewer miles.

“If one or two [lenders] make a change, that really doesn’t mean that much. But when they all start making changes in a short window,” it signals a trend, he says.

One lender, who traditionally has required 20 percent down on a truck purchase, is still working with owner-operators, says Mischeloff — but they’re now requiring operators to put an additional 20 percent into a maintenance account before issuing a loan.

“It’s a cyclical market,” says Mischeloff, referring to the recent quick-up, quick-down trucking’s seen over the past two years. Some creditors are preparing for a wave of defaults on truck loans, he says. Anecdotally, he’s heard lenders mention “rising delinquency and rising default rates” on such notes.

Avery Vise, an analyst at FTR and the firm’s vice president of trucking, said it’s “reasonable for lenders to be cautious” right now, “to protect themselves from something more catastrophic.”

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Spot market rates in the second quarter were trending below the recent five-year average, says Vise, but FTR isn’t forecasting a trucking recession. Rather, the market appears balanced between capacity and freight demand, and general economic indicators like residential construction, manufacturing and employment, while not stellar, don’t indicate any looming economic issues.

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