Equipment repossessions and liquidations nationwide continued to rise during the third quarter, most notably for trucks and construction machinery, reports Nassau Asset Management.
Nassau's NasTrac Quarterly Index (NQI) reveals trends in repossessions and orderly liquidations based upon the company's internal activity.
Nassau provides asset recovery, appraisal, collections, liquidation and remarketing services for equipment finance companies across the nation. The company earlier this year noted that repossessions and liquidations during the first two quarters increased significantly for the first time since 2002.
Nassau's latest NQI shows repossessions and liquidations during third quarter (Q3) 2005 compared with Q3 2004 increased in four of five categories: trucks/trailers (+188%); construction equipment (+126%); printing presses (+49%); and machine tools (+22%). Repossessions and liquidations of medical devices decreased for the first time in 2005 (-24%).
Edward Castagna, Nassau's president, says several factors appear to be influencing the upswing in some repossessions and liquidations.
"The obvious answer is that adverse economic conditions are driving up some repossessions. This is true, but not the whole story," Castagna said. "Fuel costs are among the adverse economic conditions affecting repossessions. There is no question that rising fuel costs earlier this year made it harder for truckers, construction companies and other firms to do business," Castagna says. A September 2005 Duke University/CFO Magazine Business Outlook survey cited high fuel costs as the top concern for U.S. firms polled.
"Yet part of the increase in repossessions and liquidations may also be attributed to greater leasing activity," Castagna adds. For example, if lease volume is up, even if delinquencies are as low as 1%, liquidations and repossessions will rise.
The Equipment Leasing Association's (ELA) annual volume chart shows overall leasing volume peaked at $247 billion in 2000, then decreased to a lowpoint of $194 billion by 2003. The most recent chart estimates that 2004 volume would increase to $220 billion, with 2005 volume potentially topping the industry's $247 billion peak.
The ELA recently reported that new business volume in September reached $5.06 billion, the highest for any month in 2005 and an increase of 18.1% over August.