With the arrival of August 1, the repercussions of tariffs are starting to take shape, prompting fleets to be more cautious about capital expenditures. The freight sector is stabilizing, compelling heavy-duty fleet equipment managers to make more informed and adaptable choices. Whether it’s modernizing aging trucks, negotiating improved financing terms, or extracting cash from existing equipment, today’s approach to fleet management emphasizes maintaining liquidity, minimizing risk, and enhancing efficiency.
“Uncertainty isn’t favorable for spending on capital equipment,” remarked Anthony Sasso, senior vice president and head of equipment finance at TD Bank. “Anything that makes it hard for a CEO or CFO to see the economic benefits of investing in new equipment is detrimental.”
Uncertainty looms large in the current market. Nevertheless, replacement purchases appear consistent. According to Sasso, fleet managers continue to phase out older trucks to avoid escalating maintenance costs, but are often hesitating to invest in new equipment aimed at growth or capturing new freight opportunities.
“Holding onto a power unit longer only increases maintenance costs,” he explained. “Hence, we see clients continuing to replace assets, but the procurement of new equipment for growth or expanding client bases is being adversely affected.”
Adapting Truck Financing Terms
Amid economic challenges, many fleets are reevaluating their equipment financing strategies. Sasso noted a shift from short-term loans to longer durations, with once cash-flush buyers now opting for financing to safeguard liquidity.
“Clients who previously engaged in three-year financing are now considering five-year terms,” Sasso said. “Some clients who paid cash or used working capital are now seeking financing options.”
Truck Leasing Benefits
As budgets tighten, leasing trucks has become a favorable alternative, not just for its flexibility but also for its financial benefits.
“There’s no down payment required. Equipment financing can cover up to 100% of the asset, including taxes and maintenance plans,” Sasso highlighted. He also noted that fleets can take advantage of 100% bonus depreciation this year under the revised tax laws, leading to immediate financial benefits.
Flexible Lease Options
Many fleets are utilizing Terminal Rental Adjustment Clause (TRAC) leases to lower monthly expenses. This type of lease includes a balloon payment at the end of its term, which can be offset by trading in the vehicle, aligning with standard fleet turnover cycles.
“In a three-year lease, a 40% balloon payment could be expected at the end,” Sasso said. “Most of our clients are considering this balloon payment in the context of trade-ins, aiming to replace equipment before maintenance costs escalate.”
Sale-Leaseback to Free Up Cash
For fleets that previously paid for equipment in cash but now require liquidity, TD offers sale-leaseback agreements. “We purchase equipment that a client acquired last year and lease it back, providing essential cash inflow while also structuring the lease to reduce costs with a balloon payment,” Sasso explained.
This solution has gained popularity across various sectors, particularly in trucking where operating costs remain unpredictable despite lower fuel prices.
No Hidden Costs
“There’s no catch,” Sasso emphasized, citing favorable tax provisions that enhance truck leasing opportunities.
“A recent tax bill has shifted from an interest expense deduction model (EBIT) to EBITDA, increasing the ability to write off interest on various financial arrangements, thereby lowering tax liabilities,” he explained. This measure is intended to encourage capital expenditures in the U.S. and provide clients with significant tax incentives. In uncertain times, Sasso suggests that the most prudent fleets leverage various financing options to preserve cash flow and prepare for future rebounds.
“Cash is critical in any market; liquidity is key,” Sasso concluded. “We offer solutions that enhance liquidity, improve cash flow, and lower initial costs—exactly what fleets need right now.”
