As 2023 comes to a halt, which has been a year filled with economic revival, uncertainty, and fluctuation, Mitsubishi HC Capital America, which happens to be North America’s largest non-bank, non-captive finance provider, has gone on to identify five trends that are likely to alter the equipment finance industry in 2024.
As per senior vice president of corporate development at Mitsubishi HC Capital America, Chuck McKay, when we talk of recession, inflation as well as interest rates have largely replaced discussions. One may be indeed turning the corner in 2024, with a year of reviving as well as rebalancing before enough growth period returns in the years to come.
More buyers in cash- As supply-chain stress has gone on to ease, commercial vehicle dealerships are looking for more cash buyers and a sales cycle that’s shortened. Because of this, dealers will require more floorplan financing so as to ensure they can go on to keep the right inventory on the floor at that to at the right times. OEMs, which are looking for ways to support their dealers, will growingly turn to floorplan financing as one of the most effective ways to do so.
Cross-border deal growth- Post-pandemic, business that takes place between Canada and the US continues to pick up. Lenders that go on to offer strong cross-border financing, beyond having sales offices in each country, should go on to perform well in 2024.
Consistent rise in as-a-service financing- Companies from various industries are getting to realize the advantages when it comes to as-a-service business model and that they shall continue to figure out how to execute the same. Rather than financing one product or a product for a specialized use, the as-a-service model impactfully enables any company to fund its entire balance sheet, according to McKay.
The issue, according to him, is going to be in the definition as well as the execution of services so as to add to a product offering. For instance, a trucking company that is wanting to become an as-a-service provider has to do much more than just provide lease and sales choices. They will, in fact, also need to give out tracking, roadside service, as well as other support logistics in order to get vehicles in the right place and that too at the right time.
McKay adds that becoming a true as-a-service provider goes on to involve well-thought-out strategic as well as tactical decision-making. He anticipates that industry will see more JVs, coop agreements, along with other teaming arrangements. As-a-service happens to be in the early stages of the growth S curve, and one can indeed anticipate a curve that’s steep enough to continue all across 2024.
Asset sharing rise- Asset sharing happens to be a strategic agreement within the businesses in order to share an asset to the advantage of both organizations. By investing in the ownership of multiple users, companies can go on to save money by making utmost use of their devices. The required number of assets that are needed reduces, which goes on to mean the overall cost of ownership also reduces. Asset sharing, which happens to be more asset-efficient as compared to as-a-service, happens to be already prominent when it comes to the healthcare sector, especially with certain imaging as well as surgery-related machines.
McKay goes on to explain that asset sharing needs tracking, maintenance, as well as other support logistics- the same basic core services that happen to be linked with as-a-service models. The only difference is, indeed, ownership. Interestingly, as-a-service ownership is likely to be in a defined entity, but on the other hand, asset sharing happens to be a network.
Apparently, the two models will blur and also merge in 2024, he says, and as the equipment goes on to become more specialized, the more the models will look alike. One of the major aspects to remember is that one can do as-a-service sans sharing but cannot do asset sharing without as-a-service.
Worries and impacts concerning interest rates- Many companies happen to be concerned about the probability of further interest rate rises from the Federal Reserve and the probability of a recession. Due to strong positive indicators, which include robust GDP as well as slowing inflation, it is looking very possible that one could be in for the mythical soft landing, opines McKay.
Interest rates, as per McKay, will probably be at current levels and may be reduced somewhat. The start of 2024 should continue to remain a rebalancing period, with the economy progressing at its potential again in 2025-2026.
