Mitsubishi HC Capital Canada Highlights 2024 Trends for Equipment Finance Industry
As-a-service financing, sustainability work to accelerate as economy looks to brighten later in year
TROIS-RIVIÈRES, Quebec, Dec. 18, 2023 – Closing out a year of economic ups and downs, commercial finance company Mitsubishi HC Capital Canada is identifying four trends that are likely to play a significant role in shaping the Canadian equipment finance industry in 2024.
“The picture we see for 2024 is a very different one than we saw just a year ago,” says Éric Patry, Senior Vice President and Chief Financial Officer (Canada), a subsidiary of Mitsubishi HC Capital America. “Coming out of 2022, economic conditions were very positive,” he explains. Now, though, the Canadian economy is slowing down, much more so than the U.S. economy. “We’ll likely see further slowing before an upward trend begins in the summer.”
From an equipment finance perspective, he projects that companies may scale back on expenses and capital expenditures. They are starting to lay off staff, he notes, which will have a greater impact as companies struggle to meet customer needs. Additionally, banks throughout Canada are taking more provisions for losses.
- 1. Key industries will serve as economic proxies. The transportation industry has been impacted greatly by the slowdown, explains Patry. “It’s always the first one to suffer in an economic slowdown and the first to recover. As supply chain issues have been largely corrected, we’re now waiting for the inflation issue to resolve, and transportation should bounce back.”
The construction industry is harder to predict, he says, noting that higher government spending is typically the norm in a recessionary environment. Considering the need for additional housing across the country, and resulting increases in rents and housing prices, this may be a possibility. “We will need to wait and see how government spending scales in 2024, which will play a large role in how the construction industry fares.”
- 2. Cross-border deals and U.S. investments may grow. “The fact that the U.S. economy is doing well – and perhaps able to achieve a “soft landing” – will help us in Canada,” says Patry. Although the Buy American Act and Buy America requirements are negatively impacting some Canadian companies, he adds, the current exchange rate is helping Americans invest in Canadian enterprises. Lenders that offer comprehensive cross-border financing – that goes beyond maintaining sales offices in each country – are in a stronger position for 2024.
- 3. As-a-service financing will continue to gain traction. “In terms of growth in as-a-service financing, we are anticipating a rapid uptick as companies further understand the benefits and how to implement it.
Patry also sees the as-a-service industry evolving to accommodate its three-pronged structure. As-a-service financing needs a user, a finance provider and a manufacturer or distributor that will provide maintenance and service, he explains. “We’ll likely see more partnerships as companies find the right associates to create strong cooperative arrangements.”
- 4. Work in achieving Sustainable Development Goals will mature. Right now, every company has a different definition of what sustainability means to its operations, says Patry. “The important thing is that people are trying to do something, evaluating what changes they can implement and starting to make real progress.” Sustainability can become very complicated in certain industries and will evolve in 2024 as businesses figure it out more. “Progress is quickening,” he says.
“Looking at 2024, U.S. economic health has been surprisingly good, while Canada continues to face more difficult economic conditions,” Patry added. However, rates should start to decrease mid-year, he says, which will benefit many companies. “As the year progresses, we should see equipment finance headed in a very positive direction.”