First, there are the captive finance companies. Consider them as the financing arms of all major manufacturers. They serve exclusively to finance the public with a view to selling their trucks. In the past, they have been somewhat liberal in their underwriting criteria and may like the mortgage industry to be too liberal. This relaxed underwriting of the past has led to serious defaults today.
This has led to a subsequent tightening of lending. The end result is the sale of fewer trucks and trailers; customers find it harder to get financing. Nevertheless, the captive financing company will always be part of the commercial truck financing game.
Secondly, the independent finance companies. They are in no way tied to the manufacturers. They exist to make a profit from financing commercial vehicles and other equipment. They can be a welcome alternative for several reasons. First, they can be someone to turn to when a good credit customer is “tapped” with the captives. This means that they have already financed trucks with the company’s own financing companies and no longer want to do this (at least for the time being) for the customer.
These “A” credit sources are competitive with the captives, and with the help of various independent sources, a customer can finance an unlimited number of trucks. Independent people are also great for other reasons. Suppose a customer wants a TRAC lease agreement with different parameters than what the captives offer. You can look for an independent provider who can tailor a TRAC lease for that customer. This is invaluable to the more demanding client, who has a tax structure as his primary objective. Here’s another one, we have clients who call us all the time, who may only work nine months a year. They need financing that can offer skip payments. In this way, the customer can make nine instead of twelve payments a year and take three months off his payments.
The last one who is at home with us is the customer with bad credit. An independent finance company usually only works with people with good credit. For the customer with bad credit, his possibilities are limited. Thanks to independent finance companies (like ours) that specialize in bad credit customers, these customers can get the financing they need to start or grow their business. Imagine independent financing companies offering financing products that can cover almost any need.
The third form of financing for commercial vehicles is the self-financing programme. Self-financing, which is usually offered by smaller providers, offers advantages for dealers and customers. In-house financing enables the dealer to move more inventory than if he had not done so. This is important because a smaller retailer does not always have its own financing program. And with the credit crunch, independent finance companies are losing importance.
The dealer can act like an independent financing company by offering all the same products and at the same time retaining the advantages of the interest on the vehicles sold. The bad side, of course, is that they also suffer from payment defaults, where the customer stops paying. The advantage for the customer is that he has a one-stop shop where he can finance a truck in the same place from which he buys it. The disadvantage is that they are limited to their inventory.