ELFA Lists Top Equipment Acquisition Trends for 2012
January 10, 2012
Washington, D.C. — The Equipment Leasing and Finance Association (ELFA) which represents
the $628 billion equipment finance sector, revealed its Top 10 Equipment
Acquisition Trends for 2012. Given that every year U.S. businesses, nonprofits
and government agencies spend in excess of $1.2 trillion in capital goods or
fixed business investment (including software), financing more than half of
those assets, these trends impact a significant portion of the U.S.
economy. Growth, uncertainty and numerous end-user benefits underlie many
of the trends that businesses acquiring equipment this year can expect.
ELFA President and CEO William G. Sutton said,
“Equipment acquisition has played a critical role in driving the supply chains
across all U.S.
manufacturing and service sectors. We have distilled recent research data,
including the Equipment Leasing & Finance Foundation’s 2012 Equipment
Leasing & Finance U.S. Economic Outlook Report, comments and articles
from industry experts and member discussions at our meetings and conferences
into our best insight for the top 10 Equipment Acquisition Trends for 2012.”
ELFA issued the following Top 10 Equipment Acquisition
Trends for 2012 to help businesses with their strategic equipment acquisition
plans:
1. New equipment
acquisition will gradually, but steadily improve. The equipment
finance industry is forecasting 9 percent growth in investment in equipment and
software for 2012, indicating that equipment acquisition by businesses in many
industry sectors will increase this year.
2. Replacement needs
will continue to drive new equipment acquisitions. Aging of equipment and
replacement needs will be the main drivers of new equipment acquisition, as
businesses await stronger signs of economic improvement before expanding their
equipment investment.
3. Uncertainty over
proposed changes to lease accounting will have businesses playing a waiting
game. The resolution of proposed changes to lease accounting
standards by the Financial Accounting Standards Board (FASB) and the
International Accounting Standards Board (IASB) later this year will have
businesses waiting to find out how their balance sheets, earnings and other
financials will be affected. Meanwhile, industry advocacy will continue to
mitigate the negative impacts of lease accounting changes on U.S. businesses and the economy.
The good news is that the primary reasons to lease
equipment will remain intact, from maintaining cash flow, to preserving
capital, to obtaining flexible financial solutions, to avoiding obsolescence.
4. Used equipment
prices will rebound in many, but not all, market segments. The
collateral value of many categories of equipment that ‘bottomed out’ over the
last few years will rebound in 2012. Car and truck values will be
particularly strong, and construction equipment also will hold its
value. Certain segments, such as corporate aircraft, will remain at
relatively lower values.
5. Equipment
finance companies will enhance customer relationship and support capabilities
to build competitive advantages. End users of equipment will benefit
greatly from the efforts of banks and captive and independent finance companies
to grow. They’ll be providing specialized areas of expertise and
value-added customer services that will be a win-win for both lessors and
lessees.
6.
Credit availability will enable equipment
acquisition for eligible businesses. Last year credit
approvals for the equipment finance industry remained above 75 percent. In
2012, businesses seeking financing for equipment
acquisitions will often find credit approvals higher in the equipment
finance industry than from bank loans.
7. Organizations seeking ways to cut costs and increase
operational efficiencies will look to technology innovations. The flexibility, scalability and relative costs
associated with cloud computing and shared services will begin to compete with
new IT equipment purchases for many businesses.
8. The continuation of a limited bonus depreciation will allow
businesses to plan for equipment upgrades or expansions. The continuation of the depreciation bonus will
allow businesses to write off 50 percent of the cost on new equipment purchases
in 2012. It remains to be seen whether the 100 percent bonus depreciation
rate that expired at the end of 2011 will be restored.
9. Global
financial pressures will continue to add uncertainty to U.S. investment
in equipment. The fallout from the euro-zone crisis and other international
financial instability will be a wild card in how much U.S. capital investment picks up
this year.
10. Individual equipment markets will see
steady growth slightly below 2011 rates. Investment in agriculture, computer and software, industrial, medical and
transportation equipment will be positive, but may not match 2011 growth rates.
Construction equipment investment is likely to slow in the immediate near term,
but could be buoyed by the energy and housing sectors later in 2012.
More Information
Businesses that want to learn more about how they can
incorporate equipment financing into their business strategies may visit
www.EquipmentFinance101.org.
For forecast data regarding equipment investment and capital spending in the United States,
see the Equipment Leasing & Finance Foundation’s 2012 Equipment Leasing
& Finance U.S. Economic Outlook Report at
http://www.leasefoundation.org/IndRsrcs/EO/.
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