Transportation equipment financing to remain an attractive option for truckers

2017 was a strong year for the equipment finance industry.

According to a recent study conducted by the Equipment Leasing and Finance Association, it marked the seventh consecutive year that businesses increased their spending on leases, loans and lines of credit for equipment investment. 

Anthony Sasso, head of TD Equipment Finance, observes that transportation represents 26% of all equipment financed

In an exclusive interview, Logistics Management asked him “What types of transportation equipment financing will be the most attractive in 2018 and why?”

“Due to anticipated interest rate hikes in 2018, controlling financing costs is going to be important for logistics companies,” he says. “The good news is, borrowers have a number of choices when it comes to both financing products and partners for trucking equipment because of the long-life cycle of the collateral.”

According to Sasso, two of the most popular products they recommend in a rising interest rate environment are longer term loans and tax-oriented leases.

“Loans with 3- to 5-year terms for tractors and 7+ years for trailers allow companies to bring down the monthly equipment finance cost,” he says. “Tax-oriented leases give “the lessor” the ability to claim the tax benefits of ownership through depreciation deductions, but passes through to the lessee those benefits in the form of reduced rentals.”

LM also asked Sasso what impact would the rising interest rate environment impact have on trucking…what this means for the industry overall.

“For those trucking companies with floating or variable interest rates, they may consider refinancing into a fixed-rate loan,” he says, “A fixed rate loan gives the borrower more certainty in a rising rate environment.”

For example, he notes, if and when rate increases occur a borrower’s monthly payment will not be affected because they are locked in to a specific amount each month.”

Sasso concludes that this also has “a positive impact” on the company's cash flow.