Major Trends Affecting Heavy Equipment Financing In 2024

Construction equipment is one of the major players in the state’s GDP. The trading of heavy equipment brings a lot of revenue and business to the industry ultimately helping the government to balance its economy. However, the different trends and financing situations may affect these industries and most possibly disturb the economic balance. As we have entered into 2024, there are many strategies and plans on the table to follow but some of them might not work for longer. The financing that helps the buyers and companies to invest in heavy equipment purchases keeps fluctuating which will bring some substantial shifts in spending. However, the financing environment for construction equipment is expected to change as 2024 approaches, driven by changing market conditions and new developments in the sector. Leading non-bank, non-captive finance provider in North America, Mitsubishi HC Capital America, has highlighted five key trends that will significantly impact the market in the upcoming year. 

Better Floor plan Financing and More Cash Buyers

As supply chain stress decreases, commercial vehicle dealerships are seeing a change in their physical environment. Dealerships are adjusting to a shorter sales cycle and an increase in cash buyers by looking for more floor plan financing. Strong financial plans are required to sustain the ideal amounts of inventory after this change. With a greater emphasis on floor plan financing, Original Equipment Manufacturers (OEMs) are anticipated to play a critical role in helping their dealers get better revenue on their machinery for sale in the USA.

Increase in Cross-Border Deals

Business relations between the United States and Canada are getting stronger after the pandemic. In 2024, lenders who are prepared to provide strong cross-border finance options will be successful. They have to handle the difficulties of conducting business internationally in addition to maintaining sales offices in every nation. For the equipment finance industry to continue growing, it will be necessary to adjust to the changing dynamics of cross-border transactions.

Persistent Growth in As-a-Service Financing

Companies can finance their entire balance sheet instead of just specific items with the help of the as-a-service business model, which is becoming more and more popular across industries and in the USA. The difficulty, though, is in identifying and putting services in place to improve product offers. Joint ventures, cooperation agreements, and strategic decision-making are likely to be major forces behind the as-a-service growth curve. As the companies grow, they can expect traditional funding approaches to converge with as-a-service frameworks.

Growth of Asset Sharing

As a more affordable option, asset sharing, a strategic partnership between companies to exchange resources for mutual gain, is becoming more popular. Businesses can improve asset use and lower the total cost of ownership by pooling ownership across several users. For asset sharing to be successful, tracking, maintenance, and support logistics must be integrated. As specialized equipment becomes more common, it is expected that the distinctions between asset-sharing and as-a-service models will become more doubtful in 2024.

Interest Rate Concerns and Their Effects

Although the economy is recovering, worries about future interest rate increases from the Federal Reserve remain significant. The cautiously optimistic prognosis is provided by Chuck McKay, SVP of Corporate Development at Mitsubishi HC Capital America. A ‘soft landing’ scenario seems likely given encouraging signs including a strong GDP and declining inflation. In early 2024, interest rates are predicted to be stable or perhaps slightly decline, which will cover the way for a period of re-balancing before possible growth in 2025–2026.

Wrapping Up

Stakeholders in the construction equipment financing sector need to be flexible to respond to changing trends as the sector directs the complexity of 2024. The equipment financing will require adaptation and creative decision-making to succeed in the market, as evidenced by the rise of cash purchasers, cross-border deals, and the blending of as-a-service and asset-sharing models. Industry participants must prepare themselves for development and resistance amid economic uncertainties by keeping an eye on these trends.