Mitsubishi HC Capital executive details
Kirk Mann of Mitsubishi HC Capital America says a three-and-a-half-year freight recession and an asset bubble have driven many banks from truck financing
A three-and-a-half-year freight recession has reshaped truck financing. According to Kirk Mann of Mitsubishi HC Capital America, it damaged the credit of borrowing carriers and pushed many traditional lenders out of the market. Both factors are now limiting the long-awaited equipment replacement cycle.
Mann, executive vice president and general manager of transportation vendor solutions at Mitsubishi HC Capital America, financed trucks throughout the downturn. He witnessed many repossessions. "There are a lot of lenders, banks that left, and so we’ve had the benefit of being one of the lenders actually lending money in this space," Mann told FreightWaves. He said remaining competition consists mostly of OEM captive finance arms, a few large independents, and some bank-led groups.
The carriers that failed were predominantly the newest. Mann stated that, on average, 85% of motor carriers with fewer than two years of experience and their own operating authority failed over a three-year stretch of the downturn.
The asset bubble and its collapse
Mann recalls an enormous asset bubble. In early 2023, he and a colleague agreed a used Freightliner Cascadia was worth about $45,000, but their company was financing similar trucks at around $110,000. Data from J.D. Power's Commercial Truck Guidelines shows a typical 4-year-old sleeper tractor sold at auction for between $30,000 and $50,000 in the eleven years before COVID-19. That same truck peaked near $118,000 in early 2022.
| Period | Typical Auction Price for 4-Year-Old Sleeper Tractor |
|---|---|
| Pre-COVID (11-year average) | $30,000 - $50,000 |
| Early 2022 Peak | ~$118,000 |
According to ACT Research, Class 8 average retail prices had settled at $60,986 by September. Mitsubishi HC Capital lent into the bubble knowingly. "We made the decision to stay in that market even though we knew there was a tremendous asset bubble, because we wanted people to know we were there," Mann said. He added that if he could do it over, he would mitigate risk exposure differently.
The unwind came as repossessions. "The problem was when things kind of unwound those trucks were coming back because there were payments that people couldn’t sustain, and so those trucks came back like in droves," Mann explained. The lender has since improved recoveries on transportation assets by 15% by building a dedicated asset management function.
Current lending landscape and credit profiles
Mann says carriers sensing a credit squeeze are only half right. His firm's underwriting philosophy did not change, but the credit profile of borrowers deteriorated during the extended down cycle. "So it feels like lenders are squeezing up and we’re not." he said.
The price of capital now varies sharply by creditworthiness. In a FreightWaves Today interview, Mann noted financing rates run from roughly 5.25% for investment-grade private fleets up to 12% or higher for lower-credit small operators, who often must provide a deposit. Fleets with 50 to 200 units are increasingly approaching his company through dealer relationships.
Drivers of replacement demand
For two years, the industry anticipated an equipment wave driven by pre-buying ahead of EPA 2027 rules. Mann disagrees with that view. "I don’t think it’s a lot of EPA pre-buy." he said.
Manufacturers are split on handling the 2027 rules, leaving pricing unsettled. Mann's team polls dealers constantly and gets different answers by make. He does not expect a large enough price spike to drive purchasing behavior.
Volume is up regardless. Mann said over-the-road volume at Mitsubishi HC Capital has improved by roughly 30%, driven mostly by medium and large fleets replacing aged equipment. Fleets buying new purchase almost entirely new trucks; Mann qualitatively estimates 80% new, with the rest being late-model used trucks still under warranty and spec'd to fleet standards.
Expansion is not happening. "I don’t think what you’re seeing today is fleet expansion for sure," Mann said. He explained that combining a normal trade cycle with three years of deferred replacement creates demand greater than available manufacturing build slots. He credits the rate improvement to supply leaving the market, not freight demand returning. He noted that private fleets losing volume added capacity to the for-hire market, compressing prices further.
The decisive metric: cost per mile
For carriers seeking financing, one metric outweighs all others. "For the larger customers, every lender out there that does the bigger fleet deals, they want to see that the fleet understands their cost per mile," Mann stated. "If you don’t understand your cost per mile, nothing else really matters."
Lenders are applying more scrutiny post-recession. Carriers who cannot detail their costs are at a disadvantage. "If someone cannot tell me their cost per mile for all of the categories that are included in their expense load, I really don’t have a desire to do anything with that customer. I mean, I just wouldn’t," Mann said.
He said carriers with past capital allocation mistakes must tell a story of improvement, detailing trends in driver pay, maintenance, and insurance. Revenue, he concluded, will not cover up bad management of expenses.
