Both freight factoring and fleet financing are essential financial tools for a trucking company’s owner. Freight factoring involves selling an invoice to a factor at a discount. You pay the agreed-upon fee and benefit from immediate payment. The freight factoring company then invoices your broker or shipper to collect the money owed.
Fleet financing is equally important to your company’s growth. With more trucks, you can take more work. You need the finances to afford trucks and their upkeep, and commercial fleet financing helps with that. As trucks gain more technology, the price goes up. But, without autonomous vehicles in your fleet, you’re competing against others with that advanced technology. How could this impact freight factoring and fleet financing?
What Are Autonomous Vehicles?
Autonomous vehicles are equipped with technology that makes them able to partially or totally replace a human driver in some aspects. There are five levels of automation.
Level 1 – Vehicles have one automated feature like lane-keeping assist, braking support, or adaptive cruise control.
Level 2 – Vehicles have two features.
Level 3 – Vehicles can take over safety-critical aspects of driving temporarily to assist a driver, such as taking over driving in a traffic jam.
Level 4 – Vehicles have technology that allows the vehicle to handle safety-critical features of driving if a driver isn’t, such as a self-driving taxi. Where they’re allowed to drive and how fast they can travel is restricted.
Level 5 – Vehicles are fully self-driven. No restrictions are in place in terms of driving conditions or speeds. This level is still in development.
One of the biggest benefits to Level 4 AVs is that the technology could take over controls if a driver fell asleep at the wheel. It can reduce the risk of unnecessary crashes.
How Are Autonomous Vehicles Impacting Freight Factoring and Fleet Financing?
AV does impact both freight factoring and fleet financing. There are both pros and cons.
Con: AVs Cost More
While there’s no doubt that technology provides a lot of benefits, it also costs more. Autonomous vehicles are more expensive to purchase because of the onboard computer systems. This also makes it more expensive to repair something if there’s a malfunction in the computerized system. When expanding a fleet to include AVs, costs increase.
Qualifying for fleet financing is already tough for some companies. Higher truck costs add to the burden. It’s important to have the highest business credit score possible to ensure you have a competitive interest rate. With increased efficiency, you’re able to accept more work, which increases revenues. Those revenues can be key to boosting your credit score.
Con: Leasing and Purchasing Decisions Can Be Tricky
You do have to decide if leasing AVs or purchasing them makes more sense. With leasing, you gain the benefit of lower payments, but you have to pay close attention to mileage limits. When the lease ends, you’ll pay money for every mile that exceeds the lease terms.
Working with a freight factoring company opens the door to other financial products like business lines of credit. That can be a more affordable way to purchase new trucks.
Pro: The Vehicle Technology Helps Reduce Paperwork Requirements.
Autonomous vehicle technology helps reduce operating costs while increasing efficiency. Computers handle some of the mandatory reporting that’s required, so your drivers aren’t spending countless hours on paperwork.
Pro: Insurance Costs Are Lower
With the technology found in AVs, you have reports of your drivers’ habits and can adjust training as needed. That keeps your insurance costs down. Use the lower insurance rates to have more money set aside for any slow periods you encounter during seasonal fluctuations.
Pro: AVs Help Raise Your Credit Score
When you have a solid credit rating, brokers and shippers see you as a good risk. You’re more likely to get work from new clients as you come across them on load-finding boards. With lower insurance costs from safer drivers, it’s easier to pay bills on time.
Freight factoring is another way to ensure you have funds available for monthly expenses. When you’re being paid right now instead of waiting a month or two for your payment to arrive, you keep paying your bills before the due date passes. This ensures you never have late fees draining your savings or dinging your credit score.
Consider the Many Benefits of Utilizing AV to Grow Your Fleet
Autonomous vehicles offer a range of benefits that you might not have considered. First, insurance rates may be lower. That means you save more each year, and the savings can be put back into your business or stored in an emergency fund.
Second, it keeps your drivers and other drivers and pedestrians safer. The FMCSA’s “Large Truck Crash Causation Study” found that 13% of commercial truck drivers were fatigued or fell asleep when they crashed their truck. Crashes caused by sleepy drivers are most common from midnight to 6 a.m. and 2 p.m. to 4 p.m.
With a higher-level autonomous vehicle, advanced driver assistance systems (ADAS) provide a new level of safety that protects others. Collision warning systems, lane-keeping assist, and automatic emergency braking are all features where AV takes over temporarily or warns the driver to help prevent crashes.
Third, fleet managers have more control over driver activities. Today’s technology on trucks also includes electronic logging devices (ELDs) that record how long a truck has been on the road and a driver’s been active. This is a requirement in the U.S. as it helps prevent drivers from being on the road for too many hours and becoming fatigued. Drivers don’t have to worry about keeping track of hours when technology does it for them.
Fleet managers can monitor ELDs and make sure drivers get to take necessary breaks by planning smarter routes. Also, telematic technology provides fleet managers and company owners with helpful information like drivers’ speeds, braking habits, and acceleration. It also makes it easy to optimize routes, which improves efficiency and avoids construction and other traffic delays.
What’s the most important part of leveraging freight factoring contracts to support your trucking business’s financial stability as autonomous vehicles enter the market? Choose a factoring partner that specializes in trucking. You want to work with a company that understands a trucking business’s relationship with its clients and financial structure.
Saint John Capital is one of the nation’s top freight factoring companies. We have decades of experience helping trucking companies, including start-ups, grow into companies with large fleets. Talk to us about your company and let us help you come up with a plan that ensures you get paid quickly and have tools to help your company grow as you embrace autonomous vehicles as a new aspect of being competitive.
