The ongoing tough global economic climate, coupled with savvy customers looking to secure the best deals for new and used construction equipment, is significantly increasing interest in OEM finance packages and government tax incentives to encourage sales. Guy Woodford reports.
Stenor Environmental Services Limited is an aggregate soil recycling business which also offers demolition services, plant hire and haulage. Operating from its base in the heart of Swansea, south Wales, Stenor has a waste licence facility for Natural Resource Wales.
Keen to expand, the business looked to obtain two new excavators to add to their existing fleet of four. To fund this venture, Stenor worked with
The first package was a Hire Purchase (HP) agreement of €105,795 (£75,000), supported by the Government’s tax initiative, the Annual Investment Allowance (AIA). This provides a 100% allowance on qualifying expenditure (during the first year of purchase). A further £75,000 JCB FlexiLease was used for the second machine with 100% of the instalments being offset against taxable profits.
Crucially, the combination of these facilities meant the down payments were kept to a minimum - although the HP required a 20% deposit, the JCB FlexiLease required minimal initial outlay of only three months’ instalments. This solution ensured Stenor was able to maintain a healthy cash flow during the acquisitions.
As a result, Stenor is also able to continue offering a high standard of reliability in its fleet, which is hugely important to the business and its high-profile customers.
As a result of updating the machinery, Stenor is said to have seen a significant difference in fuel consumption with the new JS220s reducing costs further.
Steve Norman, director of Stenor Environmental Services Limited, said: “We pride ourselves on excellent service and understand how important it is that our customers receive the highest standard of machines. We’ve been working with JCB Finance for over 30 years and finance all our JCB machines with them. We wouldn’t have been able to afford both machines if it hadn’t been for the flexible approach they offered as the funding for the deposits would have been too much.
“JCB Finance enabled us to make the purchases to develop the business, without affecting cash flow too much and with JCB FlexiLease, we can even benefit from the residual profits at the end of the term.”
Remaining with JCB Finance, the company has launched a two year interest free hire purchase scheme for used JCB machines held in stock by the UK JCB dealer network.
There is no upper limit for how much can be borrowed after a 20% deposit has been paid but the JCB machines must not be more than 10 years old during the period of the finance agreement. Normal terms and conditions apply and the scheme is subject to availability through participating JCB dealers.
JCB Finance’s managing director, Paul Jennings, said: “Deals need to be transacted before the end of September 2015 and a budget has been set, so time is of the essence if you want to enjoy interest free finance on a used JCB. This is a landmark event in the history of JCB but providing finance for used JCB equipment is something we’ve been doing for over 45 years, and interest free finance will certainly help our customers.”
Jennings also pointed out that by selecting a Hire Purchase facility customers could still be eligible to take advantage of the UK government’s £500,000 (€698,250) Annual Investment Allowance (AIA) scheme. The scheme means that for every £1 spent on plant and machinery there is the potential to save £1 in taxable profits.
“There has never been a better time to buy with the AIA and Interest Free finance,” continued Jennings. “The AIA potentially offers the equivalent of a 20%-45% discount depending on the business rate of tax.” George Osborne, UK Chancellor of the Exchequer, announced in the recent Budget that the AIA will fall to £200,000 (€279,300) on the 1st January 2016.
Renzo Gavarrino, brand relationship manager CNH Industrial Capital - Construction Equipment, says CNH Industrial Capital offers a wealth of experience in the construction sector through its team of finance experts. It also specialises in Construction Equipment finance business, and competence and flexibility in its insurance and financial services solutions.
“The availability of our financial and insurance services, as well as the scope and description of the products vary country by country,” explains Gavarrino. “Depending on the usage of the machines, equipment life-cycle management, accounting and financial expectations, CNH Industrial Capital offers Case clients hire-purchase or loans for customers who want to purchase quarrying or other construction equipment; financing lease for customers who want to lease with an option to purchase at the end of the contract; and medium term rental (single user for durations from 24 to 60 months) – operating lease schemes for customers who want to renew the equipment regularly and match the financing with the expected usage in duration and number of hours.”
Gavarrino says all the above financial products can be managed with or without services included in the instalment, and vary country by country due to local legal, fiscal and accounting regulations. “We also offer insurance services to cover the machines or individuals – they include our Extended Warranty services available across most countries in Europe,” he adds.
Of how CNH Industrial Capital’s offer differs from other finance arms of other leading OEMs, Gavarrino says: “As CNH Industrial Capital is the exclusive and preferred financier of Case Construction Equipment dealers and end customers, our captive in-house activity provides us with greater familiarity with the Case brand, its business and its customers, which other financial services providers and banks would not have with other manufacturers.
We can finance equipment on an individual basis or through fleets or dealer rental fleets. We also finance the attachments, and we finance both new (Case) and second-hand machines of all makes.
Our schemes are specially designed to match customer needs (such as the breaks in winter months) because we are involved in Case’s upstream selling process.”
Gavarrino says that while CNH Industrial Capital’s product portfolio is standard and similar to other industry sectors, they offer great flexibility. “What differs is our capacity to adapt the repayment plans, the durations and the schemes to the customers’ needs, such as skipped payments, franchises, and services included,” he explains. ”Thanks to this, we finance the majority of the Case machines sold in Europe.”
After a deep plunge in sales in the second half of the 2000s (which affected EMEA countries differently), Gavarrino notes that the construction equipment business and quarry sector have shown a slow recovery. They have not returned to the volumes of 2008, hence related financing activity has slowed down in volumes. However the market is seeing a “cautious uptake”.
Gavarrino continues: “The quarrying activities in EMEA are already known and identified and we rarely see new regions or areas of increasing activity; what changes for the CNH Industrial and Case business outlook is our approach to expanding our business, entering new markets and developing new finance activities in markets where we were not present before, such as Central & Eastern Europe, Maghreb, the Middle East, Southern Africa o/w RSA.”
Volvo Financial Services (VFS) packages are based on customer needs, explains the company’s vice president and MD Andres Volbert “Does the customer want to own or to use the equipment and for how long? What is his plan over the end of a contract? What is the right monthly payment and what other services, in addition to financing, would he like included?
“VFS offers Instalment Credit, Finance- Operational- or Full Service Leasing and Insurance, a wide range of products in 43 countries worldwide (which may vary due to regulations and legislations). We package these VFS products with Volvo equipment to deliver a total solution that is based on our industry expertise, to meet best our customer business needs.”
Volbert says VFS and
According to Volbert, customers are requesting more flexibility in financial options, and financial expertise from a source that can truly offer a total solution. “We respond to this need with options such as ‘pay as you earn’ packages, so the finance solution is directly linked to the customer’s machine performance,” he explains.
“In addition to our total offering, our market differentiator and competitive advantage is also our speed, expertise, and knowledge of both our customer’s business and the products we are financing,” Volbert continues. “We don’t just go to customers and say ‘Here are our financial terms, take it or leave it’. We take the time to understand their needs and to structure solutions that enhance their business operations.”
Volbert says the popularity of VFS packages has grown as Volvo Construction Equipment has continued to provide added customer value at lower cost. A recent example is Volvo Financial Services’ integrated insurance offer, where customers can benefit from increased uptime due to faster repair approvals, and low premiums are negotiated specifically for Volvo machines.
“We often hear from both dealers and customers that our packages are easy to handle for customers with much less complexity, because the customer only interacts with just one experienced partner: Volvo.”
Across Europe, Middle East and Africa, Volbert says VFS is seeing a growing demand in packages that include both finance and insurance. “Customers differentiate more between core and support function, and they formulate strong service level expectations to select the best equipment and finance partners,” says Volbert. “Amongst other competencies, it is our high performance and reliability which further define Volvo’s attractiveness. It allows customers to focus stronger on their core business.”
Volbert says that VFS aims to integrate a financial package through Volvo Construction Equipment dealers at the point of sale, so the overall purchase is as straightforward for customers as possible. “For us, it is about more than just earning the first sale. We are interested in the ‘total life cycle’ of customers and machines,” he concludes.
