The Equipment Leasing Forecast
The Equipment Leasing and Finance Association (ELFA) has just released its projections for the top equipment acquisition trends for the coming year. This takes into account data from last year as well as patterns that have been established in the leasing and financing arena. Collated data is used to make the following projections:
- How corporations view the economy will be one of the driving factors in any business acquisition considerations. Forget technological developments or the need to replace obsolete equipment; the economy will be the deciding element in most cases.
- Equipment investment will pick up, but not until the second half of 2013, and the rate of growth will be hampered by fiscal concerns. Many companies will shy away from making large scale capital investments and any acquisition activity will occur as a result of the policy uncertainty that brought the economy so close to the fiscal cliff.
- There will be enough pent up demand to spur investment across a number of equipment types, with construction, agriculture, and transportation industries leading the way. Many other industries may wait for the next replacement cycle before acting.
- Low interest rates are projected to continue through 2014, and this may well serve to help boots equipment acquisition activity. This will help to maintain cash flow and provide the ability to preserve capital and improve expense planning .
- Seven out of ten businesses are projected to use some form of equipment leasing and financing in order to secure the new equipment that they need.
- Business size will determine the level of new equipment acquisition that will occur, with larger businesses leading the way and smaller businesses exercising a bit more fiscal caution.
- Cloud computing will change the face of the way companies pay for IT investments, spawning new financing options and providing for variable payment structures.
- Credit market conditions are forecast to remain favorable for long term equipment leasing, with the credit supply improving for acquisition projects.
- The recent one year extension of bonus depreciation will provide a number of incentives for businesses to acquire new equipment, not the least of which is the ability to deduct up to 50% of the cost of new equipment purchases in 2013.
- The value associated with lease financing will remain, however businesses will begin to adapt their acquisition strategies to comply with changes to lease accounting standards. Proposed changes have been submitted to the Financial Accounting Board and he International Accounting Standards Board, and those changes should be announced this year.
“Equipment acquisition plays a critical role in driving the supply chains across all U.S. manufacturing and service sectors” ELFA president and CEO William G. Sutton, CAE, was quoted as saying. “We have distilled recent research data, including the Equipment Leasing & Finance Foundation’s 2013 Equipment Leasing & Finance U.S. Economic Outlook Report and U.S. Equipment Finance Market Study 2012-2013, industry participants’ expertise, and member input from ELFA meetings and conferences to provide our best insight for the top 10 Equipment Acquisition Trends for 2013.”