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Equipment Leasing: No News Is Good News

While the Greek debt crisis may have spooked potential machinery buyers, forecasts of cheap capital may have made them picky.

Has the European debt crisis really taken the steam out of the U.S. economy, or is the trouble abroad a blip on the path to recovery? One key indicator of growth, commercial-equipment leasing, is equivocal on the matter, to say the least.

While the most recent figures released by the Equipment Leasing and Finance Association reveal that new business volume rose in May by 5% compared with May 2009, they also show that such volume dropped by 6% — from $4.7 billion to $4.4 billion — in comparison with April 2010. May, of course, was when the debt crisis blossomed in Greece and began to surface in other European nations.

For their part, equipment financiers are content to attribute the May swoon to transitory noise in the markets. While corporate and individual consumers have "a lot more confidence that the economy's recovering" than they did a year ago, says Ed Foley, executive vice president of Caterpillar Financial Services Corp., "you're going to see month-to-month spottiness in terms of new business [because] customers' confidence is still fragile."

These days even good news can have a dampening effect on corporate investment in capital equipment. On April 28, when the Federal Reserve announced it would keep the target interest-rate range for borrowing federal funds at 0% to 0.25%, it forecast "exceptionally low levels of the federal funds rate for an extended period." That suggests that companies in the market to borrow money or sign a lease to buy new equipment will enjoy a lengthy period of low-cost financing. But it also means that companies will have a diminished sense of urgency to replace or add equipment, according to Russell Nelson, president of Farm Credit Leasing Services Corp.

In May "people just took a pause to weigh all the factors; all the forces in the economy," says Nelson. Potential purchasers can take a month or two to decide whether or not to buy. If deep economic uncertainty persists, they're likely to decide to "hold on to their cash and keep themselves as liquid as they can," he adds.

To be fair, tightening of lending standards by banks and independent equipment-leasing companies might have something to do with the recent dip in new business. Nelson notes that the farm-equipment finance company's approval process for loans and leases for longstanding customers hasn't changed in the past 18 months. The company has, however, been spending a lot more time evaluating new credits and paying close attention to their collateral and liquidity, he says.

At Caterpillar Financial, it's the customers that have changed, not the standards, according to Foley. While the company's lending strictures have been fairly constant for 20 years, the damage done to corporate balance sheets by the recession has made "it more difficult to get a customer over the approval line," he adds.

The best indicator of future demand for equipment financing is the current state of borrowers' businesses, Foley says. Potential lessees or borrowers must "be comfortable that they've got enough work on hand to pay for their existing equipment before they take the step to buy new equipment," he says, noting that customers will first exhaust the alternatives of using (and repairing) their existing equipment, renting equipment short term, or buying some of it used.

One good sign is that prices are going up for some kinds of used equipment, the Caterpillar lending executive says. Another, Foley adds, is that the company's customers are putting more hours on their machines and more repair into them, "which means they're working, and thus [clients are becoming] able to pay more promptly."

Landoll expands successful Air-Spring

Drill Line with new All-Purpose Drill Models.

Marysville, KS — June 2010 — Innovation comes in a smaller package with the introduction of a new 5210 Series Grain Drill from Landoll. Initially available as a 15-foot model — 10’, 12-1/2’- and 20’ working widths will follow in the future — the 5210 Series joins the 30- and 40-foot 5530 Series as the first in its size range to feature pneumatic down-pressure springs on all row units and true no-till capabilities. Unlike the three-section 5530 Series, the 5210 features a rigid frame with the choice of a standard hitch or Category II or III 3-point hitch mounting. In addition, the standard hitch version is also available with optional no-till coulters on a tongue-mounted gang.

“The 5210 can be configured for a wide range of applications, from conventional seeding to no-till farming to pasture management,” says Jamie Meier, Landoll sales manager for grain drills. “Although the heavy gauge seed box has a generous capacity of 3.2 bushels per foot, it can be split 60/40 with the dry fertilizer option to provide two bushels of grain seed per foot, plus 105 pounds per foot of fertilizer.”

A small grass seed option on the 5210 also allows customers to split the box between two bushels of grain and 1.2 bushels of grass seed, which is funneled through a separate set of meters. Finally, the 5210 is available in both 7 ½- and 10 inch row spacing with a choice of 2 X 13” smooth or 3 X 13” double rib press wheels to match soil and crop conditions. A set of four flotation tires help carry the load on standard hitch models, while a spring-loaded drive wheel ensures constant soil contact on both pull-type and 3-point-mounted models.

Perhaps the best feature of the 5210, however, is Landoll’s unique pneumatic down-pressure spring that provides 120 to 400 pounds of down pressure on the 15.8-inch diameter opener blades. The two-position mounting even allows for heavier down pressure on the staggered units that follow the tractor wheel tracks.

“Unlike conventional down-pressure springs, which can provide too much or too little pressure, depending on the position of the row unit, our all-purpose air springs deliver consistent down pressure throughout the full range of travel of the opener,” Meier says. “As a result, seed is consistently placed in the bottom of the trench where it has the most potential, regardless of the terrain or soil conditions.”

Other features of the All-Purpose Air Spring Openers are forward-mounted plastic seed tubes; maintenance-free pivot points, and patent pending front-mounted soil hold-down strips that prevent soil from sticking to the blades, while helping to close the seed trench.

For more information on the Model 5210 15-foot grain drill or other Landoll products, call 785-738-6613 or visit www.landoll.com.

Kuhn Introduces New Disc Mowers

Kuhn North America, Inc., of Brodhead, Wisconsin, introduces two new additions to the GMD 1010 series of disc mowers, the 10' 2" GMD 3110 and 11' 6" GMD 3510. These disc mowers are designed for producers looking for superior cut quality and lower maintenance.

An exclusive “lubed-for-life” cutterbar reduces maintenance requirements and provides a more efficient, cleaner cut at varied speeds, especially in difficult conditions. The patented Lift-Control^® system improves suspension, further enhancing performance. These models also feature a non-stop auto-reset safety breakaway, and externally removable disc bearing stations with heavy-duty gears and bearings for convenient, reliable operation and quick service. Hydraulic-folding, horizontal rear transport provides low and narrow positioning with effective suspension that reduces load and shock on the tractor.

Kuhn North America, Inc., of Brodhead, Wisconsin, is a leading innovator in the field of agricultural and industrial equipment, specializing in spreaders, mixers, hay tools and tillage tools. Kuhn- and Kuhn Knight-brand products are sold by farm equipment dealers throughout the United States, Canada, and many other countries.