Corcentric Fleet Solutions senior vice president, Patrick Gaskins, addresses the challenges of 2023 while setting the tone for 2024 in equipment finance. In this Digital Exclusive, Gaskins gets into the good, the bad and the ugly of what this year brought and what lies just around the corner.
The Equipment Leasing and Financing Association (ELFA) recently published its forecast for funding growth by market segment for 2024. As is the case for most years, some sectors will be on the rise and others will be trending downward. Because I specialize in the transportation sector, that will be my focus.
This year has been challenging in many respects and 2024 will be more of the same. Supply chain issues continue to have an impact on equipment deliveries and while replacement part backlogs have diminished they are still extended lead times for critical replacement components.
Freight volume has declined rapidly from its highs in 2022 and spot rates are still depressed causing many fleets to reduce capacity. A reduction in capacity will always have a negative impact on the used tractor market. Used vehicle inventories will continue to increase and used prices will continue to decrease.
Some encouraging news about investing in the industry is that many fleets are looking to become much more efficient through the use more advanced technologies. I recently attended a technology conference specific to the transportation industry and the attendance was exceptional. The fleet attendees were engaged and exploring all options on how to optimize their fleet assets, routes, and reduce any and all empty miles. Safety was also a very hot topic, and the use of drive cams is almost becoming the standard.
New technology investments show the commitment to safety not only for drivers but the general driving public. Technology investments are upgrades to existing fleet assets and will also allow fleets to capture additional data to enhance their fleet optimization models.
The hottest topic is the investment in battery electric vehicles (BEV) and/or alternative fueled vehicles. In discussing this topic with may larger fleets the question I have is, “is the budget for these vehicles coming from marketing or fleet?” I know this may not be a popular statement, but I don’t think there is a solid ROI model for BEVs and the private investment in the infrastructure required to support these vehicles.
Is the investment being made for a press release or has it been determined that these vehicles will be more cost effective? So, what is the sensible path forward? I have always stood by my belief that new technologies need to be tested on a small scale and once the ROI has been determined we can invest accordingly.
With all of that said, 2024 looks to be a solid year for new heavy truck orders. Fleets will need to be conscious of where new vehicles will be domiciled since states like California have distinct specification requirements for new equipment delivered in 2024. Fleets will also want to make sure they are taking advantage of any state and federal subsidies offered for new equipment.
The equation remains the same:
These are all the factors fleets should examine at to determine if they should keep a current asset or replace it. Those factors are true whether a fleet is looking at existing technology or emerging technology.
In the trucking industry, for both fleets and their financing sources, any potential investment needs to pencil out from a total cost of operation standpoint. That analysis can include both “hard costs” and “soft costs,” but ultimately any investment needs to pay for itself over the life of the vehicle.