Equipment lenders prioritize flexible floorplan, dealer relationships amid supply chain shifts

Equipment lenders are adjusting to evolving supply chains and pricing dynamics by emphasizing closer dealer relationships and flexible floorplan financing. 

The trade deficit of goods and services in the United States increased 32.5% month over month in July to $78.3 billion, with exports up 0.3% and imports up 5.9%, according to a Sept. 4 report by the U.S. Bureau of Economic Analysis. 

Goods financed from foreign suppliers jumped 13% year over year through April, according to an Aug. 28 report on supply chains by Wells Fargo.  

Many OEMs are continuously tweaking production and revising their full-year outlook to account for the impact of tariffs on supply chains, material costs, consumer behaviors and dealer inventories.  

For example, CNH Industrial lowered production hours by 12% in the second quarter, according to its Q2 earnings materials. Separately, British OEM JCB announced plans to double its San Antonio production facility to 1 million square feet, according to an April 4 company release. 

Equipment lenders have always worked closely with dealers, “but when you have these types of disruptions, you want to be even closer,” John Crum, head of Wells Fargo Specialty Equipment Finance and Leasing with a focus on transportation, told Equipment Finance News.  

To help dealers navigate supply chain disruptions, Crum said lenders are analyzing metrics including: 

• Equipment on dealer order boards; 
• Potential order cancellations; 
• Floorplan aging; and 
• Inventory turn rate. 

“It really comes down to, what we call in times like this, basic blocking and tackling,” he said. “Know your customers, understand their needs and anticipate that if they need extra capacity, you can provide extra capacity to help them find it.” 

Flexible floorplanning 

Avoiding accrued interest on unsold inventory is crucial for dealers in the wake of high floorplan rates and supply chain uncertainty. Thus, some dealers are focused on minimizing stock inventory and driving more pre-sales, Titan Machinery Chief Financial Officer Bo Larsen said during the company’s Aug. 28 earnings call. 

The company’s objective is to get “lean and mean on stock levels of inventory,” he said. “That in itself helps your terms and lowers your floorplan interest expense.” 

Lenders and OEMs are also providing flexible floorplan financing to help alleviate challenges facing dealers, Wells Fargo’s Crum said. 

“We have seen some OEMs provide extended terms from a floor plan perspective,” he said. “We have seen extended terms or interest free both for floor plans as well as … their retail customers.” 

Changing pricing dynamics 

The impact of tariffs on equipment pricing has been mixed this year. Several truck OEMs have enacted surcharges and price increases in response to rising material costs, while some agriculture OEMs absorb higher expenses as they prioritize reducing dealer inventories. 

Truck OEM International Motors, for one, is charging a $3,900 tariff fee regardless of where the truck was made, a dealer stated in a July 16 report by equipment research firm IronAdvisor Insights.  

Lenders can adjust to fluctuating prices by closely communicating with OEMs, Crum said, also noting that factory lead times are decreasing as OEMs work to reduce tariff exposure. 

“The real story here is that the final chapter of this book has not been written because it hasn’t settled,” he said. “We do have a lot of conversations with the OEMs, talking about manufacturing in the U.S.” 

These conversations allow lenders to gauge OEMs’ reshoring plans and potential timelines for building or expanding U.S. production facilities. 

“We have seen some price increases, but we think the final version of what this looks like is not out yet.” 

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