Equipment Finance Conference Review

How technology and sustainability are driving change in vendor finance



The equipment finance stream at the recent Asset Finance Connect Autumn 2023 Conference discussed the commercial merits of the structures in place between lenders and manufacturers to facilitate the OEM selling more products at strong margins and the finance company running a viable and profitable business.

The importance of specialist technological systems and new sustainable finance products was raised to focus on the increasing use of data for reporting in the industry, direct to customer solutions, and the adoption of usage-based models to enable the circular economy.

The session, moderated by Asset Finance Connect’s head of equipment finance, John Rees, included representatives from a captive (Karima Haji, Transformation Director – Scania UK), vendor program provider (Vincenzo Scalzone, Head of Technology, Healthcare and Green Energy – SGEF), commercial partnership (Steve Bolton, Managing Director – PEAC Solutions), and a joint venture (Paul Jennings providing his experience from 43 years at JCB Finance).


The introduction of a captive (finance company owned by a manufacturer) was originally seen as a way of getting products out into the market, but now it’s all about the customer experience and relationship and brand loyalty, providing a one-stop-shop according to Karima Haji in the video below.

However, being a captive comes with its own set of challenges: the OEM must raise billions of pounds of debt to fund its finance company, investment in an IT system to run a finance company, and manage all the regulation that comes with running a regulated finance company. Despite all these issues, Haji believes that having a captive arm is still beneficial for the OEM.

As part of the Traton Group, Scania has multiple brands supported by their captive arm, which present huge opportunities and synergies from a systems and data perspective, as well as the capital needed in the money market.

The benefit of the captive according to SGEF’s Vincenzo Scalzone, based on his previous experience working for GE Capital, is the cultural alignment within the brand between the OEM and the finance company.

Haji sees the captive performing a dual role: (i) existing primarily to fund their manufacturers’ own products and get them on the road, whilst (ii) also being a profit centre that is a separate regulated entity.

Joint venture (JV)

The joint venture structure enables longevity, which is clearly visible in the joint venture between JCB and Lombard.

Working at JCB Finance for 43 years, Paul Jennings noted that the joint venture between JCB and Lombard enabled JCB to dramatically expand its sales during that time in the UK.

The amount of capital needed for large JCB machines meant that as a manufacturer you can soon build up a significant capital exposure on your balance sheet, but the JV with Lombard meant that JCB did not have to do that. JCB were given enough leeway within the business to operate as a semi-independent business.

Paul Jennings notes how being part of a joint venture can feel like you are on a “see-saw”. Having the utmost respect for both partners, Jennings notes how it “can be a challenging path to keep both shareholders happy”. While the bank wants financial return, the OEM wants the cheapest money available and limitless credit appetite.

Vendor and commercial partnerships

A vendor program incorporates the advantages of having a captive but without the regulatory and systems challenges, according to Vincenzo Scalzone from SGEF, who work with international and local vendor programmes.

However, the cultural alignment boasted between a captive and their OEM is less obvious in a vendor program, commercial partnership or JV.

Vendor programs were initiated to help the manufacturer to sell more products at better margins to a retained customer base. The vendor focuses on the product, R&D, and customer journey which suits a lot of vendors depending on what the OEM is looking for.

Steve Bolton, Managing Director at PEAC Solutions highlights how commercial partnerships can offer flexibility to all parties: “flexibility is core to what we are able to offer, whether that be a JV through to a vendor relationship and across different sectors.”

Understanding different verticals is key, according to Bolton, and the ability to change and adapt is transformative to how you can operate and give the customer what they need.

Steve Bolton sees the flexibility and innovation offered by PEAC Solutions can move across multiple jurisdictions, which can then be applied to a number of their commercial partnership.

Relationships built on trust

Joint ventures require a high degree of trust, collaboration and cooperation of both parties, according to Paul Jennings.

Within the captive and OEM relationship, trust is important, according to Karima Haji, with two separate legal entities and two very different businesses – manufacturer/sales organisation and finance house. Karima notes that, “trust becomes inherent because you are connected through the brand.”

PEAC’s Steve Bolton sees commercial partnerships like a marriage; a relationship that is built on foundations and gets stronger as time goes by. With commercial relationships, trust is vital, and it is critical to get it right contractually on day one but Bolton notes that “you also need to be able to flex it as you go along because of other challenges like technology and regulation.”

The technology challenge

Technology is an important component of the relationship for captives, JVs, vendor and commercial partnerships, creating strong links across companies.

A variety of different systems have been adopted by the panel with Scania recently adopting pan-European software from FIS; JCB who developed their IT system in-house, not a Lombard system; and SGEF who are currently changing their system to the Odessa platform to help them leap into the 21st century with scalable and API-ready products, bringing increased connectivity with vendors and customers.

SGEF are currently implementing the very ambitious ‘One SGEF’ global initiative, changing their front, middle and back-end systems, with a content management system (CMS) from Odessa. Highlighting the importance of technology for vendor partnerships, Vincenzo Scalzone notes, “In the future, the vendor will choose the partner who makes asset finance easy for them and this comes with technology.”


Gathering data is key to the industry with increasing availability of telematics from assets, but it raises the question of who owns the data. At Scania, the customer owns the data but must give Scania the consent to capture the data.

With greenhouse gas emissions reporting, we can see how important the data from assets and the relevant technological systems will need to become to report and transfer the data.

For example, Haji focuses on Scania’s work with their customers to monitor emissions (based on type of fuel and how the asset is driven) as a customer’s scope 1 and 2 emissions is Scania’s (OEM and captive arm) scope 3 emissions.

Impact of sustainability

Sustainable usage-based finance products, including multi-use and pay-per-use, are being introduced into the asset finance market to enable the green transition and circular economy.

Scania’s Karima Haji discussed how traditional leasing products will always be available, but as-a-service models are being introduced to enable customers to make the transition to more expensive green assets with more affordable asset-specific finance options.

“We need to be forward thinking in what new products can be put out to our market to make sure these new assets can be affordable,” commented Karima.

Finance companies are slowly starting to embrace usage models, but adoption largely depends on the asset type. Companies are mainly using pay-per-use models in the copying, digital imaging, and medical sectors, with developments also being seen in the motor finance sector.

The circular economy will see the period of usage for an asset being extended and therefore the need for less new assets. In the future, Vicenzo Scalzone sees the circular economy resulting in a change in business models with less assets being produced and sold resulting in a need to make money elsewhere, which is transformational for the industry.

Paul Jennings sees the “transition to the service contract becoming the prime focus rather than the asset and, as asset financiers, we need to get further down that path.”

Case study: Volta Trucks

Volta Trucks – electric vehicles for the last mile delivery – announced a finance partnership with SGEF and DLL and then a couple of days later in October 2023 announced they were filing for bankruptcy. Seen as a revolutionary product, Volta Trucks has potentially done for electric trucks what Tesla did for electric cars. However, their battery supply chain failed them.

Unlike Scania and other known brand manufacturers of commercial vehicles, Volta Trucks was not an established company with years of experience, R&D excellence, and the ability to raise money for R&D. They were not a well-known brand who customers could put their trust in.

New technology-led businesses with new unproven technologies need to focus on smaller vendor partnerships like PEAC Solutions, according to Steve Bolton, who will be there “early doors” at the beginning of the venture. Like the JCB Finance-Lombard JV, such a relationship can grow and develop.

“Smaller businesses, smaller funders, and non-bank loaned institutions can play a valuable role to the circular economy,” noted Steve Bolton.

Analysis from John Rees

Equipment Finance Community Leader, Asset Finance Connect

In a world where data, technology and sustainability feature more and more in customer finance, the debate regarding captive, JV or vendor partnership continues.

The panel, representing all three structures, made persuasive arguments for each model. The discussion has fascinated the asset finance industry for many years and, at Asset Finance Connect, we expect the discussion to continue for many more.

Clearly data and technology are huge drivers for efficient finance solutions in the future and, as the industry tries to support a more sustainable world, they will be required even more. But who “owns” the data? The OEM, the end user or the finance company? All parties will surely need it and it will be interesting to see who is the ‘champion’ of data at the end of the day.