Trucking Downturn: Why 85% of New Carriers Didn’t Survive

The freight market experienced a severe downturn, with 85% of new carriers failing within three years, according to Kirk Mann, EVP & GM of Transportation and Vendor Solutions at Mitsubishi HC Capital America. The lengthy duration of this downturn, spanning three-and-a-half years, can be attributed to an equipment bubble that inflated during 2021 and 2022.

In a conversation with his chief risk officer, Mann recalled a discussion about a four-year-old Freightliner Cascadia, valued at $45,000 but financed at $100,000 to $110,000. During the peak of the bubble, pre-COVID prices for five-year-old equipment reached an astronomical $120,000. Consequently, carriers who purchased equipment at inflated values found themselves immediately underwater when rates collapsed.

Mitsubishi HC Capital addressed defaults through restructuring rather than immediate repossession, reorganizing approximately 75% of its loans during its 2020 customer assistance program. While the lending landscape has improved, freight demand remains the primary constraint for carrier growth. Larger fleets are in better financial shape, while spot rates have increased alongside higher freight rejection rates in the past six months.

Replacement demand is present but still below expectations, with larger carriers turning to Mitsubishi HC Capital for financing through dealer relationships as traditional lenders tighten liquidity constraints.