Step it up

Buying, leasing or renting: now is a good time to work an equipment deal using one, two or all three in the mix.

By Mike Anderson

Before even addressing the options available to their customers, construction equipment financiers are just relieved to have customers to speak with, given the turtle-like crawl of the market the past two years.

And that leads to good opportunities right now for those earth movers and road builders ramping up to add to their fleets.

“If you have the need for construction equipment, you have good options in all three channels – in rental, leasing and long-term financing,” says John Crum, senior vice president of Wells Fargo Equipment Finance’s construction division. “It’s a good time to be thinking about what to do with your fleet right now, because you do have these options available to you … and the cost of capital is down.”

With 12,000 U.S. customers in the defined infrastructure space alone, Wells Fargo deals “from the equipment manufacturer down to the guy who’s putting the stone down on the roadway,” says Crum. “It’s a core industry for us. We do hit three channels – we go to the manufacturer space, to the dealer space and then direct to the end-user space – and we think that provides us a degree of diversity. And then the national and Canadian coverage gives us some geographic and regional economic diversity as well.

“There’s certainly money available from us, and we don’t lack competition. We’re seeing more lenders get their legs underneath them a little bit,” he says, “and I think a lot of people feel generally that while the fog isn’t totally gone, it is starting to lift. People are starting to feel a little moreconfident, both from a lender’s and an end-user’s perspective. End-users are starting to think about the composition of the fleet.”

Among that competition Crum refers to are the major manufacturers of theactual equipment financed by Wells Fargo and other independent financial services companies.

“Business in the core construction segment is definitely starting to pick up, and that’s a great sign,” says Ben Norris, vice president of financial services and treasurer for Komatsu America. “Whether that means we’ve found a firm bottom and people are getting their feet back under them again and are ready to run, or there actually are some signs of a true recovery, I’ll leave that to the economists. But the key point there is things have stabilized, demand has picked up, we’ve got our plants in the U.S. back at work and producing machines, and there are pockets of real good activity out there,” says Norris. “As a captive, we never went anywhere. We were strongly supporting our dealers, strongly supporting our end-user customers, and never did face a financial or banking crisis. However, the backdrop of the market was such that those forces were very real.”

According to state filing results compiled and projected by Equipment Data Associates [a Randall-Reilly company], based on Uniform Commercial Code (UCC-1) financing activity, the total of new and used machines for March surpassed the 10,000 mark for only the fourth month since 2008.

“Our doors are open,” says Well Fargo’s Crum. “We lent a lot of money yesterday, we’ll lend a lot today, and we’ll lend a lot tomorrow.”

Choices, Choices

So, you’ve finally gotten some work ahead of you. Now you need some gear, maybe a couple of full-size excavators, a wheel loader, four articulated dump trucks, a pair of rollers and a paver.

“We’re at a particular point in the business cycle and the economic cycle where rates are very advantageous to a contractor to go out and put some long-term financing in place right now.

At the same time, with manufacturers wanting to sell their products, there are also manufacturer-sponsored

programs that are offering some really attractive finance and lease options out there as well. It’s a good time to do all.