0% financing forges double-edged sword in equipment finance

Aggressive OEM incentives are boosting dealer equipment sales, but they create imbalanced market dynamics and competitive disadvantages for some lenders. 

OEM discounts and incentives drove a 5.5% year-over-year increase in new construction equipment sales in the first quarter, according to IronAdvisor Insights. Agriculture OEMs are also offering lower retail finance rates and special programs to support their dealer partners amid sluggish sales.  

While promotional financing from OEMs, including 0% APR, entices buyers, lenders often lose market share because they are unable to match the offers, Tom Mariani, a strategic adviser for equipment lenders and dealers at Rinaldi Advisory Services, said in a panel discussion last week at Equipment Finance Connect 2025 in Nashville, Tenn.  

“Financing at very, very low rates — 0% or 0.8% — depending on the term and the collateral, the customer is getting a great deal,” he said. “Does it help [lenders]? Absolutely not. It makes their lives much more difficult.” 

Such incentives also raise the question of whether OEMs have too much influence over the market, Skip Owen, director of sales at Columbia, S.C.-based dealership chain Hills Machinery, said during the discussion, acknowledging that 0% has benefited dealers and customers.  

“They have a lot of resources, a favorable cost of funds and I guess with the financial resources, they have a pretty loud megaphone nationally to advertise the 0% that I know is the bane of independent lenders’ existence,” he said. “They have collateral expertise, remarketing partnerships with a lot of their dealerships that in certain cases may enable them to take a little bit more risk.” 

However, aggressive incentives like 0% financing are often short-term solutions, and banks and independents generally “play a critical role in complementing what the manufacturers offer,” Owen said.  

Lenders pivot, play long game 

While many lenders cannot match OEMs’ promotional rates, they can stay competitive by offering their own special deals, including cash-in-lieu discounts, Joseph Turner, senior vice president of strategic market development at First Citizens Bank’s equipment finance division, said during the event.  

Cash-in-lieu is a rebate offered as an alternative to traditional financing or other incentives, typically used for purchasing equipment outright or making large upfront payments.  

“There are situations in which the subsidy dollars to go through financing aren’t that much more advantageous than taking a cash-in-lieu discount,” he said. “You take a cash-in-lieu discount or come to an independent or bank-owned finance company with a competitive rate.” 

It’s also important for lenders to stay the course regardless of OEM offers because dealers must be able to rely on their finance partners as market conditions shift, Turner said. 

“If somebody truly wants to use their power and influence in the market … there’s very little we can do in that particular moment,” he said. “But we can be here for the dealers over the long run to be a consistent partner.” 

Jay Darden, program director at Farm Credit Express, agreed. 

“There will be a time when they need us again, whenever what I call the John Deere funny money dries up,” he said. “We try to be there at the good times and the bad times.” 

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