Transportation Equipment Leasing Is Requiring More Cash Down
The transportation industry is highly dependant on transportation equipment leasing programs to keep enough capital on the road at any one time.
While this continues to be something that financing companies lease finance due to the huge volume of assets, on the road, the requirements have tightened up considerable.
Especially for used equipment purchases, there is more of a need to have some cash provided as a down payment in order to secure financing. Historically, even used equipment could command financing leverage at or near 1oo%.
But now, with the used market flooded with used equipment from truckers that have gone under or had some of their equipment repossessed, the ability to receive as high a level of financing for equipment loans and leases has been reduced.
Even in cases where there is additional security offered to the financing company to cover off the security risk, equipment leasing companies are still asking for down payments of 10% or more as well as first and last lease payments in advance, and commercial equipment appraisals on all the equipment proposed as security.
On top of all this, the cost of financing has also gone up for the most part, so being able to put cash down is even more important to keep the operating costs in line with what the business can afford.
This is still a hard adjustment for many operators who are used to receiving higher levels of leverage for both their new and used asset purchases and haven’t allowed for any cash reserves to build up.
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