Rental and Leasing trends and more on the One-Day Dealer Conference

In past months we covered potential paradigm shifts dealers and customers must adapt to. We also noted how companies that do not adapt to change become obsolete and disappear from our economic spectrum.

These changes happen in two ways….you change and keep in sync with customer changes, or your customer changes and finds that your level of service no longer fits their needs. In the first case you keep an important customer and could attract even more. In the latter case you become one of our adapt or die candidates feeding the disruption statistics.

In the process of gathering background for this column I visited my good friend Google and found a ton of material about trends impacting OEM’s, Finance companies, Dealers and Customers. And it should not be a surprise that Technology and Artificial Intelligence lead the parade in producing faster, more efficient processing of just about every aspect of the industry business.

Financing plays a big part in the industrial and construction equipment markets, with programs designed for OEM’s, dealers and customers. As with all industries in this age of technology and artificial intelligence finance companies are looking for ways to push the middleman out of the deals and fund deals that lower operating and interest costs paid by end users. I believe we can safely say that your financing sources in the future will help dealers secure deals because of the way they do business with the customer and OEM, find new ways to process transactions and use Big Data to provide additional value to transactions.

There are some that are saying that equipment financing, especially lease financing is on the way out because:

  • Companies are flush with cash
  • OEM sales are down
  • Equipment lasts longer
  • Increasing rental fleets lower OEM sales levels
  • New lease accounting rules
  • Bonus Depreciation

To summarize, the typical benefits of leasing you see in Finance Company advertisements are offset by the new lease accounting rules and current tax policy. Even if this is true there does not seem to be more than a modest decline in Lease Financing expected for the balance of 2019 and heading into 2020.

As far as material handling and construction equipment go lease financing could slow because the material handling segment of the Momentum Monitor Sector Matrix indicates potential negative growth in material handling equipment in the next couple of quarters. In terms of the construction equipment market segment the Index points to potential stalled growth in construction equipment over the next six months.

As noted, earlier financing sources are taking steps to maximize the use of technology and AI to gain more market share. With the resources they have available it is easy to contemplate some interesting changes coming from money sources that will provide more than just financing to the transaction.

To make a buck in financing you need qualified customers, volume, competitive interest rates and processing fees with the flexibility to meet OEM, Dealer and Customer needs. Some of the steps Finance companies are taking to meet these needs are:

  • Digital contracts and the end of paper
  • Artificial Intelligence to support pay-for-use programs
  • Predictive pricing analytics to provide state of the art pricing models
  • Using Big Data to supply equipment and user needs with surprising accuracy

Banks and Finance companies who invest and adapt by using technology and BIG Data will determine who finances material handling and construction equipment in the years to come. Think about how these new value-added processes could assist your customers decide how to finance or lease additional equipment. Finance companies able to provide this level of service will adapt and be accordingly rewarded. Are your financing sources adapting? And if they are not is it possible your customers are at risk to a competitor who has high-tech finance company as a partner?

Now how about the Rental Markets.

If you have been reading this publication you know my thoughts on how rental will impact the material handling business. When speaking of “rental” I am not addressing 60-month contracts with maintenance which are 60-month purchase agreements with maintenance contracts attached to them. I am talking pure rental agreements where customers pay for what they use when they want it.

The “Rental” industry as I see it continues to expand and will do so for many years to come, providing daily, weekly and monthly rentals, with the entire cost of ownership and operation in the hands of the rental company. If we go back to the previous comments of what adaptive finance companies are doing with AI and Big Data can addressing customer needs regarding material handling equipment be far behind? Can you envision a process where you can predict customer needs on a daily, weekly and monthly basis and adjust units on hand and pricing to meet those needs? If you could, I believe you would have a line of prospective customers banging on your door to join the program.

As a side note when I look at potential future issues facing dealer’s I always like to check what is going on in the auto industry. After reading some material on the future of auto industry all I can say is WOW because the auto industry has a lot of balls in the air and has to find ways to maneuver their bulk to stay ahead of the disruption caused by changing attitudes about cars and what they are used for and how they are used. If you are an auto OEM and want to maintain or improve market share, you need answers to the “what are they used for and how they are used” questions. OEM’s will need the agility to adapt, be customer centric and provide new business and dealer models to drive market share via sales, service, parts and rentals. Expect major changes.

As we say in the material handling business, changes taking place in the auto industry will soon show up on our doorstep. Dare I say, “Here we go again”. I will and believe this will be a good thing if you follow how the auto industry is changing their dealer model and adapt, not that you can do anything to stop the paradigm shift. You can’t.

As OEM’s, Finance companies and Dealers adapt to the changes previously discussed hopefully you will find yourself in the category of dealers who have adapted by staying in sync with aggressive customers and together are finding ways to both reduce operating and financing costs.

So, it is safe to say that equipment dealers must embrace the IT and AI assets available and partner with OEM’s and Finance sources to develop and implement ways to provide more value added to customer relationships. Adapt and you win. Don’t and you lose.

Finally, let’s discuss MHW’s One-Day Dealer Conference for personnel working in the material handling business, to be held on September 19, 2019 at the Wintrust Financial Corporation facility in Rosemont, Illinois (walking distant from O’Hare airport).

The location is good. The Price is right. Parts and Service (where you make most of your money) will be covered in detail. Other topics of the day will be in Rapid Fire format presented by experts in their field who will remain for the entire day to address questions from participants. The Rapid-Fire method will give you the “highlights” you need to know about topics without getting into too much detail. Expert panels will provide the data, answer questions, and be available for one-on-one sessions after we adjourn. You will also be provided with a work manual containing outlines of each speaker’s presentation. In short, this is a two- or three-day session condensed into one day.

David Baiocchi will cover product support and aftermarket programs.

The new lease accounting rules and revenue recognition rules which impact both dealers and customers will be discussed. Dealers need to be prepared to address customer concerns.

Federal and State and Local tax issues will be reviewed. State and local issues have become more complicated in the last year with significant penalties pending if you make a mistake.

We also plan to cover exit strategies as well as ESOPS as an exit strategy. ESOP’s work in this business and provide significant tax benefits. Those that don’t want to adapt may want to explore an ESOP.

Understanding fiduciary responsibilities is also on the agenda. Again, comply or face stiff penalties.

Wintrust will cover the interest rate and economic outlook.

Plus …. whatever else you wish to discuss.  For more details or to register go to

Author: Garry Bartecki

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