More Lenders Turn to Trucking as Housing Market Remains Weak

The housing market crash apparently has had at least one silver lining for trucking: It has brought more lenders into the truck financing market.

“We are seeing more new players who are not captive finance companies coming into the market,” Geoff Robinson, vice president for sales and remarketing at Daimler Trucks Financial, told Transport Topics.

“I’ve been starting to see this probably from the fourth quarter of 2010 and the first quarter of this year, a mix of big national banks,” Robinson added. “Household names like the GEs, Wells Fargo, we’re seeing them more frequently calling on customers, trying to compete, but only in the top tiers of creditworthy customers.”

“What I’ve seen is that banks are looking for new sources of revenue since the housing market is really weak, and they have limited opportunities to lend money there.” Chris Brady, president of Commercial Motor Vehicle Consulting, Manhasset, N.Y., told TT.

“It appears that one source of revenue growth they are going for is the commercial vehicle segment, as well as autos in general, both of which they withdrew from during the recession,” Brady added.

Duane Kyrish, owner of Kyrish Truck Centers, a Texas International dealer, said that banks have had good success in taking business away from traditional financing firms once the economic recovery got under way.

“Banks have taken the view that truck loans are a really easy target, where they can look at fleets as healthy small businesses and loan money at a pretty good rate that the usual firms couldn’t match initially,” Kyrish told TT.

He added that most new trucks he sold in the early stages of the recovery last year were bank-financed, but he said that Navistar Inc.’s captive finance arm has made aggressive steps to regain market share.

Navistar Inc., which builds International trucks, said it reached an agreement last year with GE Capital to take over its retail financing operations.

“We formed a strategic alliance with GE to create GE Navistar Capital, which provides retail financing through our dealers and fleet sales organization,” David Johanneson, president of Navistar Financial, told TT.

Dan Clark, general manager of GE Capital Transportation Finance, told TT that its transportation division is kept separate from Navistar Financial, and its agents will write loans for customers buying International trucks on their own.

One Kenworth dealer said it has set up its own truck finance arm because Paccar Inc. limits its lending.

“These captive finance arms have a set appetite, and they don’t want all purchases,” he said. “They have a target around a third of what we sell, which differs depending on market dynamics.”

Paccar did not respond to requests for comment on its truck financing. Officials from Daimler and Navistar said they do not place limits on the number of loans they make.

Daimler’s Robinson said he saw two weaknesses in the influx of big banks.

“We haven’t seen their credit appetite go to the middle tiers, customers who had a difficult time in 2008 and 2009 and are still trying to recover from the recession,” Robinson said.

He said that Daimler Financial, on the other hand, gladly lent to the smaller firms because “those who have come out of downturn among our truck customers are stronger.”

“We live or die by how the trucking industry does,” Robinson said. “Most of our customers are long-term players. They want to know what our attitude and appetite is for lending. They do not want a lender who is here today and gone tomorrow.”

Big banks, on the other hand, “can be a little more than fair-weather friends of the trucking industry” who “pop up into the market” when truck sales are rising, Robinson added.

Several banks did not return requests for comment.

A spokeswoman for Well Fargo Equipment Finance Inc. said the bank, “maintains a long-term approach to the trucking industry and applies consistent credit standards. We continued to provide financing during the downturn, based on those standards.”

On its website, Wells Fargo states: “We work with wholesalers, distributors, retailers, and manufacturers who use Class 6, 7, and 8 vehicles,” adding that it lends to highway fleets, owner-operators, or commercial vehicle dealers.

Tom Harris, manager of equipment finance and commercial leasing at First-Citizens Bank and Trust Co., Raleigh, N.C., said his firm occupies a niche not served by traditional lenders.

“The captive arms . . . and major leasing companies like Penske and Ryder . . . are for the big player, but we don’t go after the big ones,” Harris told TT.

“We procure truck and trailer leasing for fleets that have 10 to 50 trucks,” Harris said.

Mack Trucks Inc. and Volvo Trucks North America said that they maintained their strength through the recession to be able to lend to customers in the current growth cycle.

Kevin Flaherty, a Mack senior vice president, told TT that Mack and its dealers worked closely with Mack Financial Services.

Tom Guse, president of the U.S. division of Volvo Financial Services, the finance arm of the Volvo Group, said the unit’s “credit criteria and underwriting standards have remained the same despite challenging economic times, so credit approval rates have not materially changed.”