Many commercial vehicle (CV) specialists,
indeed, blame the huge losses they are incurring on the economic
climate. In doing so they fail to acknowledge the gap between
current values and these lenders’ real exposures.
Go deeper with GlobalData
Historically, road transport has been a steady
sector for quality asset-based lending for decades. Many
manufacturers and lenders have taken advantage of this – and
supersized themselves in the process – by producing a variety of
packages for end-users including ones with low initial payments,
guaranteed residual values and break clauses. They also often have
worked with too small a margin on cost of funds.
Unfortunately, those companies which, like the
banks, have overtraded and written very weak asset-based deals,
will not survive the current market. Their management, having
observed how low asset values have become, will temporarily see
this sector as just too risky.
Meanwhile, those companies with true
experience in financing assets at proper values, and also at
properly gauging future values, will possibly write less business
but will remain profitable as they can more readily cushion
themselves against losses.
Successful lenders will also be aware of their
portfolio split. After all, it is the unknown that can drop the
bomb shell – such as the foot and mouth disease a few years ago
which heavily affected lenders specialised in hanging-meat
trailers.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataAt the end of the day, as the world still
needs trucks and trailers, CV operators will still require the
finance to purchase assets.
Therefore, we should not let go of true
asset-based lending, and should manage the portfolio accordingly.
This way, both the lender and the operator, by working together
even in times of crisis, will know that the deal they have together
puts no one at serious financial risk.
Of course, some parts of the haulage industry
– mainly those concentrated around the construction sector – are
struggling at present.
But the great thing about haulage is that, no
matter the volumes of GDP to be moved in the UK or Europe, neither
trains nor planes are going to replace a truck, and there will
always be a market for CV specialists.
Donald Maguire
The author is divisional director at
Haydock Finance.
