Top ten equipment acquisition trends

The Equipment Leasing and Finance Association (ELFA), has unveiled its list of the top 10 equipment acquisition trends for the year, and says businesses will find positive momentum for equipment investment as the changing economic and regulatory environment contributes to improved business conditions.

ELFA president and CEO Ralph Petta said: “Equipment acquisition continues to drive the supply chains across all US manufacturing and service sectors. Equipment leasing and financing provide the source of funding for a majority of US businesses to acquire the productive assets they need to operate and grow.”

ELFA’s forecast trends

Capital spending to pick up in 2017 after the previous year’s negative equipment and software investment growth. The association says renewed enthusiasm by business owners to make capital investments will be driven by solid employment rates, rising incomes and higher business confidence.

Growth of financed equipment acquisitions are set to outpace growth in total equipment investment. A reduced rate of cash outlays, a greater percentage of firms financing—nearly eight in 10 businesses—and an increase in the rate of lease financing, along with market data indicating that the equipment leasing and finance industry is emerging from a period of slow growth, all point to higher investment in 2017.

More business-friendly federal policy will bolster business investment and economic growth. ELFA says businesses will be further induced to make capital investments with promised action from the new Trump Administration and Congress for infrastructure spending, tax relief and reduced regulatory burdens and other constraints. However, it warns a tempering influence to this growth scenario is the potential curtailing or elimination of interest deductibility as part of congressional efforts to reform the tax code.

Changes in trade policy will risk headwinds for equipment exports. The potential for exiting the Trans-Pacific Partnership (TPP), renegotiating or withdrawing from the North American Free Trade Agreement (NAFTA), and striking a sterner stance with China could spur retaliation from trading partners that will hinder exports and greater economic growth.

The oil industry drag on the US economy will cease. With sector spending showing positive growth after two years and the prospect of a friendlier regulatory environment, ELFA is predicting increased oil industry production and investment.

Many key equipment verticals will benefit from positive momentum. Stabilizing oil prices will positively impact not only oilfield and mining investment, but also railroad, materials handling and industrial equipment. ELFA forecasts increased construction equipment investment due to improving personal consumption and promised infrastructure spending.

Businesses will need to keep abreast of interest rate increases. Businesses will need to assess and plan for financing options accordingly as the Fed acts to keep inflation in check.

Innovations in the equipment finance industry will increase flexibility and convenience for customers. The availability of “fintech” as an alternative method of financing, managed solution transactions to realize the benefits of aligning costs with business demands and avoid obligations of ownership, and e-chattel for efficient paperless transactions are just a few of the growing trends to watch in equipment finance this year, ELFA says.

Lease accounting changes will not deter financed equipment acquisitions. ELFA says the changes in 2016 to bring leases on-balance sheet were not as burdensome as many had anticipated, and the primary reasons to lease remain intact under the new rules. This year will see organizations preparing in earnest for the new standard to take effect beginning in 2019.

Finally, ELFA believes businesses will watch for potential “wild cards” when considering equipment acquisition decisions. The impacts of geopolitical shifts such as the UK’s Brexit move and the prominence of the national front in France and other groups that are contrary to the existing liberal, free-market international order could be disruptive financially, politically and even militarily. Also, the new administration’s promised infrastructure spending will depend on the size, design and level of political support of budget-conscious Republicans to pass. Finally, the unknown and long-term economic implications of terrorism continue to loom.

Full details of ELFA’s Top 10 Equipment Acquisition Trends are here: http://www.EquipmentFinanceAdvantage.org/rsrcs/articles/10trends.cfm