The State of Trucking Equipment Finance

Without trucking equipment financing, the industry would never be where it is today. Without financing, there would be a lot fewer than the 38.9 million trucks registered and used for business purposes in the United.States, and truckers certainly would not be moving the current volume of America’s freight by weight — estimated to be 72.2%. Many trucking companies, owner-operators, and drivers needed financial arrangements to acquire the vehicles and equipment necessary to start or expand their trucking businesses.

You can use financing to purchase new or used trucks, trailers, and other equipment. Trucking equipment finance is crucial for the industry because it enables companies and individuals to acquire equipment without paying the total cost upfront. Many financing options — loans, leases, and rental agreements — provide trucking businesses with the flexibility and affordability needed to succeed.

The State of Trucking

Financing affects nearly all businesses in the trucking industry, which plays a crucial role in driving economic growth by transporting goods and materials across the U.S. In addition to the millions of drivers across the country, there are many more workers in related fields. The industry generates over $800 billion in revenue.

The trucking industry has had to overcome several challenges while reaching that amazing revenue. The people in trucking have had to deal with a shortage of truck drivers, increasing regulatory pressure, and rising operating costs. All of that leaves some trucking companies struggling to stay profitable in a market that has grown increasingly competitive. But the industry has stood up to the challenges and has remained an essential part of the economy. It also continues to play a key role in supporting the growth and success of other industries and will no doubt continue to lead the way for many years to come.

Over the rest of this article, we will take a detailed look at financing in the trucking industry. Among the many areas covered are financing’s importance to trucking, the available financing options, the types of equipment typically financed, the trends and other factors that can impact funding, and the opportunities and risks associated with truck equipment financing.

Overview of Trucking Equipment Finance

The trucking industry depends on finance to put all those wheels on the road. For many, the money to pay for that financing has to come from the cash flow truckers generate once they acquire the equipment. Various financing options are available for trucking equipment, including loans, leases, and rental agreements. With these options, trucking businesses have some flexibility and affordability they need to grow and flourish. Trucking equipment finance can also help companies manage their cash flow and preserve capital for other investments.

Another benefit to trucking equipment finance is that it can also assist companies with the costs of maintaining and repairing their vehicles and equipment. Maintenance and repair services are included in some financing options. Keeping the equipment in good working order can help you steer clear of costly downtime.

Types of Equipment Commonly Financed

Trucks and trailers are likely the first things to come to mind when one thinks of trucking equipment finance. While they make up most of the equipment that uses financing, other types are crucial to building a solid and profitable business. Let’s take a look at each type of equipment:

• Trucks: These are the primary vehicles used in transporting goods and materials. Trucks come in different sizes and configurations and can have varied capabilities and features. Common types of trucks are semi-trucks, box trucks, flatbed trucks, and refrigerated trucks.
• Trailers: These cargo-carrying vehicles, which are attached to trucks, are usually made of steel and can be enclosed or opened, depending on the cargo transported. Some common types of trailers include dry vans, flatbeds, reefers, and tankers.
• Other equipment: GPS tracking systems, communication equipment, and safety gear are also trucking assets that can be financed. All three can help improve the efficiency and safety of trucking operations.

Trucking Equipment Financing Options

Not only is there flexibility in the types of equipment you want to finance, but there are also options for financing. Here’s a look at some of those options:

• Loans: Loans are usually the No. 1 option for trucking equipment financing. With a loan, a company borrows money from a lender and pays it back, plus interest, over time. This route gives trucking businesses the upfront capital they need to buy equipment. There is also the possibility of flexible repayment terms, with options for fixed or variable interest rates and different repayment periods.
• Leasing: With this financing option for trucking equipment, you pay a set amount each month to use the equipment for a specific length of time. At the end of the lease term, the business has the option to purchase the equipment or return it. This can be a cost-effective option if you want to use equipment without being saddled with the total cost of ownership.
• Rental agreements: The third option for getting trucking equipment is a rental agreement in which a company rents equipment for a set period of time at a predetermined rate. For companies that need equipment on a short-term basis, the rental agreement gives them flexibility and provides a more affordable option.

All three options have pluses and minuses; the best choice should boil down to your specific needs and circumstances. A finance provider can help businesses evaluate their options and choose the best solution.

Trends and Challenges in Trucking

While the trucking industry is a major employer in the U.S., as the numbers above have shown, quite a few trends have produced challenges for those running a trucking business. Here are some of those trends and their challenges:

• Truck driver shortage: The scarcity of truck drivers means there aren’t enough qualified drivers actively working to transport goods. If it’s harder to find qualified drivers, it’s harder to fill loads to be guided by those qualified drivers.
• Regulatory pressure: Many concerns put pressure on those transporting products, from re-emerging hours-of-service rules to discussing one day using speed limiters to the mandates on electronic logging devices. 
• Rising operating costs: Supply chain slowdowns during the pandemic and inflation have made trucking one of the many industries trying to contend with rising prices from fuel to maintenance to day-to-day expenses.

These all mean many trucking companies need help maintaining profitability and staying competitive. Trucking equipment finance has also felt the pinch. Here are three areas that affect financing:

• The economy: When the country is going through economic growth, trucking companies might be more likely to invest in new equipment, leading to a greater demand for trucking equipment finance. But during times of economic downturn, businesses often take a more cautious approach to large purchases, causing the need for trucking equipment finance to drop.
• Regulations: When regulations governing trucks change, financing is almost always affected. For example, stricter emissions regulations would likely require trucking businesses to invest in more fuel-efficient equipment. That equipment is quite often purchased with the help of some financial maneuvering. But changes in other types of regulations can have an adverse effect. If hours-of-service and safety standards expand, it could raise a company’s operating costs and make it more difficult for them to afford new equipment.
• Technology: Adopting new technologies — like advanced driver assist systems and electric vehicles — often requires updates or replacements, which increases equipment costs. This adds another likely area in which trucking businesses must seek out financing. But on the positive side, the new technologies usually also improve the efficiency and productivity of operations and can potentially make this particular trucking equipment financing a more attractive investment.

The Effects of COVID-19

The pandemic has affected all areas of the trucking industry, and financing is no different. Let’s take a look at the overall industry and financing in particular and identify areas that the pandemic has altered:

• With the lockdowns and other measures to control the spread of the virus, there was an initial drop in demand for goods and materials. That led to a decrease in trucking volumes and revenue.
• The volume and revenue drops meant many trucking companies started experiencing financial difficulties and needed help maintaining profitability.
• In addition, there was a decrease in the value of used trucks and equipment, making it more difficult for businesses to finance the purchase of new equipment.
• The rise in demand for personal protective equipment (PPE) and other medical supplies led to a temporary increase in demand for trucking services, which provided some relief for the industry.
• During that time, the pandemic made it clear what an essential role the trucking industry plays in maintaining the supply chain and how reliable and efficient transportation services are imperative.
• Spurred by the need to find more ways to be efficient and cost-effective, technology in the trucking industry was significantly accelerated by the pandemic. Advanced technology, such as GPS tracking systems and telematics, has become more in demand.

As you can see from the above chain of events, the COVID-19 pandemic has had a complex and varied effect on the trucking industry and trucking equipment finance. The pandemic showed how vital the industry is and how resilient it can be when facing steep challenges and adversity.

Opportunities and Risks in Trucking Equipment Finance 

Despite its ups and downs in recent years, trucking equipment finance is here to stay, and there are many opportunities for growth and innovation in the industry. Here are a few of them:

• This is a perfect time for offering more flexible financing options. When loans may seem too steep and costly for a trucking company, leases or rental agreements might just be the ticket to success. One of those approaches can help a business manage its cash flow and preserve capital for other investments.
• The ability to provide financing for purchasing advanced technologies, such as electric vehicles and advanced driver-assist systems, is no more timely than now. These systems, which can improve the efficiency and sustainability of trucking operations, can put a business a step ahead in such a competitive world.
• Keeping equipment in good working order is one of the greatest ways to save money these days, so developing financing options that include maintenance and repair services should be at the top of anyone’s list.
• Financing can also help businesses find fresh ways to keep up with the competition. Going into new markets like international trucking or focusing on specialized segments, such as refrigerated or flatbed trucking, can provide growth opportunities. New enterprises will likely need financing to get them off the ground.
• Expand horizons by working in partnership with trucking equipment manufacturers and other industry stakeholders to offer comprehensive financing solutions to help businesses acquire the necessary equipment.
• Data analytics can improve the efficiency and accuracy of underwriting and risk management, which can help make financing more accessible and affordable.

By capitalizing on one or more of these opportunities, companies can help support the growth and success of the trucking industry and the broader economy.

Finloc 2000 Can Help You Secure a Loan Quickly

Those in the trucking industry and the world of trucking equipment finance have had to overcome many challenges in recent years. They have shown resiliency and persevered. It’s difficult to predict how things will go because of factors like the economy, regulations changing, technological advances, and customer demand. Still, it’s a sure thing that both groups will be searching for ways to expand and improve one of the country’s most vital industries. One of those trucking finance companies working to make things better every day is Finloc 2000. With offices in the U.S. and Canada, Finloc 2000 can help you secure a loan quickly. With more than 45 years of experience, Finloc 2000 offers many ways to finance — flexible buyout options, skip leases, step up/step down options, and fair market value leases — to help you acquire whatever your business needs and keep your company rolling along. Visit our website and schedule a call today.