The latest figures from the Australian Bureau of Statistics show capital expenditure was running 6.4% higher in the March quarter compared to the same period last year.1

CommBank’s lending data suggests that this trend continued as the financial year came to a close. In the year to 30 June 2023 (FY23), CommBank saw lending growth increase significantly for cars, up 30%, and a 27% rise in financing for heavy trucks.2 That was outpaced by computer equipment, rising 43% year-on-year.

By sector, lending for equipment in commercial transport and medical and healthcare grew substantially over the financial year. Agribusiness machinery also recorded material FY23 gains, according to CommBank data. 

Chris Moldrich, CBA General Manager Asset Finance said strong cross-industry investment in passenger transport was helped by the 235% rise in electric vehicle purchases and increased inbound supply. He notes that government incentives were a clear driver of businesses’ decisions to purchase or upgrade.

"Despite economic headwinds, we’re seeing demand for capital equipment across the country as businesses seek to shore up capacity, modernise and find productivity gains in the current climate," Moldrich says.

"A period of supply chain bottlenecks means businesses planned ahead even as inbound delivery times improved. Others have replaced assets they’ve held for longer than expected during Covid or taken advantage of the Federal Government’s Instant Asset Write Off before the end of FY23."

The forces guiding investment decisions

Looking more closely at what’s influencing vehicle and equipment purchasing shows macroeconomic factors top the list. East & Partners' research confirms that most businesses are thinking about interest rates (70.9%) and inflationary conditions (62.1%).3

However, businesses are far less likely to be concerned about the rising cost of assets (15.5%), with almost twice that number considering the lifetime costs (30.1%). A similar number nominate replacing existing equipment as a driver.

As Moldrich points out,
"While businesses are navigating rising expenses and weighing up costs over the effective life of equipment, the benefits of replacing and upgrading can come into sharper focus.”

"This is where new equipment can be more efficient, help save on maintenance costs or avoid downtime. Of course, there are additional costs when procuring new cars or equipment, which must be factored into the investment case," Moldrich says.

The East & Partners research also shows that access to working capital is seen as vital among businesses, particularly smaller ones4. Moldrich says that to prevent asset purchases from constraining cash flow, businesses can take advantage of flexible financing solutions.”

Top tips when navigating asset purchases

According to Moldrich, businesses can keep the following in mind as they work through their decision-making process when acquiring or updating vehicles and equipment:

  • Managing lifetime equipment expenses: don’t forget to factor in access to local support, parts and accessories, which can shift the ongoing operating costs of equipment.
  • Cover during the order period: alongside placing orders early, longer-term pre-approvals can help manage delivery delays and unexpected changes to equipment prices, shipping costs or even foreign exchange movements.
  • Financing terms and costs: as interest rates fluctuate, businesses can consider the advantages of a fixed or variable rate financing agreement.
  • Flexibility to meet future needs: given the rate of technological advancement that can bring forward a need to upgrade, considering financing terms and duration are important.

To learn more about how CommBank can assist with business financing solutions to invest in the latest equipment innovations, visit CommBank Asset Finance

Industry data from East & Partners shows CommBank was the largest primary asset finance provider in the Australian market for FY235. To learn more about our asset financing solutions, including discounted rates on green and efficient vehicles and equipment, visit CommBank Asset Finance