Financing Crucial to Modernize Vehicle ParkFri, 09/01/2017 - 13:18
In the commercial and heavy vehicle business, financing is vital for companies that face the need to expand or upgrading their fleet, according to José Chacón, Executive President of Navistar Financial Corporation Mexico. Support to meet such capital needs is necessary to renew the country’s current fleet.
“Financial institutions play a key role by supporting new and old clients with capital injections for their transport or logisitics operations,” says Chacón. Unlike what happens in the light vehicle segment, where financing plans and loans are oriented to the end user, heavy vehicle financing is crafted to support the particular needs of a company, regardless of size or corporate structure. Chacón says Navistar and Navistar Financial lean on development banks, private banking and debt investors to secure funding sources.
Navistar Financial has found in NAFIN and Bancomext the perfect allies to support companies with imminent fleet renewals, including owner-operators and small companies with an average fleet age above 17 years. These development banks provide the funds to deliver units and Navistar Financial crafts tailor-made solutions that may include financing of used vehicles in cases when the purchase of a new unit is not an affordable option. For companies requiring hundreds of units, Navistar Financial partners with banks and other investors.
Private parties share the risk when getting involved with financial assets issued by Navistar Financial, which is why the company is committed to managing its credit-risk ratio to ensure portfolio quality. “Our overdue portfolio remains stable at 2-2.5 percent and all our financing plans are backed by the significant residual value of our vehicles,” says Chacón. Navistar Financial’s structured financings have earned good ratings from entities such as HR Ratings and Standard & Poor’s — HR AAA and mxAAA, respectively — bolstering investor confidence in the medium and long term.
Navistar Financial participation in its parent OEM represents 50 percent of the company’s overall sales. According to Chacón, considering only truck sales, Navistar Financial’s contribution is around 60 to 65 percent. Although the company’s priority is to look out for its clients’ best interests, Navistar Financial has also found a way to support its parent company’s operations by financing vehicle exports to Latin America.
Navistar Financial’s portfolio has grown 14 percent on average for the last five years and it expects to maintain this momentum at least until 2021. Along with traditional financing, Navistar Financial has developed leasing solutions that according to Chacón “are perfect for clients that want to grow their fleet but do not have the needed capital structure. Leasing can be ideal for clients with contracts of a fixed duration,” he says. “At the end of the contract, the client can choose to either return the vehicle or purchase it at the market value.”
To maintain steady growth for the next five years, Chacón knows that Navistar Financial must adapt its plans and solutions to provide the best fit for each client. The company already provides its clients with expert advice regarding the best financing and leasing plan based on the clients’ specific needs. The company is also working on structured insurance programs and Chacón says Navistar is offering insurance solutions for cargo, employees and even a company’s facilities. Digitalization has been another priority in the last few years, deriving benefits for clients such as the possibility to monitor their financial and credit status online. The company’s goal for 2019 is to build a user-friendly digital platform that will foster a tighter relationship between Navistar Financial and its clients.
Amid economic uncertainty and a volatile exchange-rate environment, Navistar Financial denominates its financing plans in pesos and offers clients fixed terms for financing and leasing. “Those elements eliminate payment volatility,” says Chacón. “It helps Navistar maintain its sales and ensures clients can follow a healthy payment program.” Our business strategies should ensure continued growth in 2017, says Chacón. “We estimate positive results in 2017, likely surpassing the OECD’s projections for the country’s GDP. This would mean that Navistar Financial expects revenue growth above 2 percent for 2017.”