Wains World

Rising Equipment Value in the Trucking Industry

Over the course of 2021, mergers and acquisitions in the transportation and logistics industry grew. The Tenney
Group observed and reported their findings that took place last year and examined what is expected to happen in
2022.

From this report, we’re highlighting an issue with how the rising equipment values have become significant. During the last five months, we’ve experienced underestimated fleet values when settling a Physical Damage loss. Our biggest concern for our insureds is not having the necessary dollars to replace the unit(s). Insurance companies are seeing values being underestimated by 25% to 45%.

For transportation companies, having your fleet currently valued for insurance coverage reporting is the first step in removing the gap of underreported values to an insurance company. It’s an area for owners and risk managers to pay particular attention to today. Having your fleet valued can come from many sources: Truck/Trailer dealers, Auction sales, On-line sales, & Truck/Trailer appraisers.

The Tenney Group listed “Rising Equipment Value” as the first issue to watch for in 2022.

“This graph, courtesy of Taylor Martin, shows what a 2016 Freightliner Cascadia Sleeper truck sold for in 2020 compared to 2021. In December of 2020, the vehicle sold for $33,031. In December of 2021, the same vehicle sold for $65,963 – an approximate 100% increase in one calendar year. Taylor Martin’s Director of Appraisals, Andy Vering, shared ‘It may be Q3 or Q4 in 2022 before the used equipment market begins normalizing. That assumes we reach a resolution with the chip shortage in the not-so-distant future, which I believe is possible.'”…”Trusted equipment value experts believe the temporary equipment value spike in 2021 will normalize or effectively disappear in the next 9-15 months.”

An article from Freight Waves, also highlights the rapid inflation cost of equipment affecting small carriers and businesses. “The cost of used 3-year-old Class 8 trucks (UT3) has increased 70% over the past year, according to ACT Research.”

In an article published by C. H. Robinson, a lead supporter of logistic platforms, wrote a Freight Market & Rates Insight piece explaining that the industry is stuck in an “under supply” market. It states that “…the market has been holding in the undersupply position now for an extended period. This is due to the dynamic nature of the economy, challenges in new tractor and trailer production, and labor shortages after the reopening of the economy in 2020.” With this being said, it’ll require the transportation and logistics industry to be more flexible with budgets and expectations for the current market cycle.

To read the full reports, go to the links below:

https://www.thetenneygroup.com/wp-content/uploads/2022/02/Tenney-Group-2021-2022-MA-Report.pdf

https://www.freightwaves.com/news/rapid-cost-inflation-hits-small-carriers-and-businesses-harder

https://www.chrobinson.com/en-us/resources/insights-and-advisories/north-america-freight-insights/

Sources: Tenney Group, Freight Wave, C. H. Robinson

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