You’re likely familiar with some form of the well-known adage, “Hope for the best, Prepare for the worst” and nothing brings to mind that sentiment quite like the unforeseen events of 2020 so far. As it relates to the business of trailers and fleet operations, it’s best to plan for a possible economic downturn. So what does the data say?
In keeping with the swift market changes that have ruled 2020, new projections on Used Dry Van Trailers point to a trend of decreased asset values. Pictured below, the Sandhills April 2020 data on Used Dry Vans shows the trend for year-over-year average prices for used assets trending lower. Looking at the historical data from 2016/2017, history suggests that the downward trend will continue (see graph below).
Additional data from Sandhills further indicates that Used Dry Van inventory values are declining or remaining flat while inventory is rising. With the total used market for dry van trailers valued at $63 million dollars and rising (Sandhills, April 2020), now may be the time to plan an alternate strategy and shore up your balance sheet.
The sale leaseback, a trusted and sound financing structure, may be just the financial tool you need to prepare for a possible downturn. A sale leaseback agreement helps you and your business to maximize return on investment for owned assets and frees up cash, making you better prepared to weather challenging market fluctuations such as a recession or a temporary disruption to business volume like we’ve seen with the global pandemic.
1. You have 20 assets valued at $5,000 each.
2. In the sale portion of the agreement, we, the buyer, give you, the seller, a check for $100,000.
3. In turn, because you still need access to your trailers for daily business operations, we lease the trailers back to you at an attractive monthly rate, usually for terms between 12-84 months.
In a sale leaseback scenario, the seller works with CLC who will leaseback the assets to them immediately after the sale. This frees up capital for the seller, untying cash without sacrificing critical resources.
While financing structures like a traditional business loan can put limitations on how the funds are used for your business, the capital obtained from a sale leaseback provides endless flexibility in how it can be spent to fortify your business.
A Look at the Unique Benefits of a Sale Leaseback Arrangement
- Can help acquire capital to fund growth
- Allows businesses to have more cash on hand in the event of an acquisition or partner buyout scenario
- Can fund a real estate transaction
- Provides a level of freedom not seen in other financial options such as loans; you are free to use your funds as you see fit without restriction
- Saves on cost of ownership and administrative time by providing a clean exit strategy while balancing and refreshing your fleet
- Improves your balance sheet
- Helps you quickly maximize ROI for owned assets before an economic downturn wreaks havoc on market values
Given the importance of liquidity coupled with falling asset prices, a sale leaseback solution may be the answer to combat current uncertainty and market instability. CLC’s advisors are ready to run the number for you at no obligation.