ELFA Announces Top 10 Equipment Acquisition Trends for 2013

Thinking about adding a new piece of equipment to your fleetthis year? The Equipment Leasing and Finance Association (ELFA),which represents the $725 billion equipment finance sector, hasrevealed its Top 10 Equipment Acquisition Trends for 2013. Giventhat every year U.S. businesses, nonprofits and government agenciesspend in excess of $1.2 trillion in capital goods or fixed businessinvestments (including software), financing more than half ofthose assets, these trends impact a significant portion of the U.S.economy. Businesses considering acquiring equipment this yearwill consider numerous end-user benefits while weighing continueduncertainty related to economic conditions and fiscal policies.

“Equipment acquisition plays a critical role in driving the supplychains across all U.S. manufacturing and service sectors,” saidELFA President and CEO William G. Sutton, CAE. “We have distilledrecent research data, including the Equipment Leasing andFinance Foundation’s 2013 Equipment Leasing and Finance U.S.Economic Outlook Report and U.S. Equipment Finance Market Study2012-2013, industry participants’ expertise and member inputfrom ELFA meetings and conferences to provide our best insightfor the Top 10 Equipment Acquisition Trends for 2013.”

ELFA issued the following Top 10 Equipment Acquisition
Trends for 2013 to help businesses with their strategic equipment
acquisition plans:
1. Corporate perceptions of the economic outlook will be aprimary driver of business investment decisions. Despitepressing considerations such as technological innovations andaging equipment, the economy will be the true barometer forwhether or not businesses acquire new equipment in 2013.

2. Equipment investment will pick up in the second half of2013. Equipment investment will grow this year, althoughthe rate of growth will be hampered by fiscal uncertainty.Some companies will remain cautious about taking on largecapital investments even now that important decisions impactingshort-term fiscal stability have been made. Equipmentacquisition activity will gain momentum through relieffrom the policy uncertainty that brought the economy to theedge of the fiscal cliff. An improving housing sector will providean added boost.

3. Pent-up demand will spur investment across varied equipmenttypes. Demand for replacement equipment will driveinvestment in the construction, agriculture and transportationcategories in particular, while other equipment typeswill await the replacement cycle. However, greater economicimprovements will be needed before significant equipmentinvestment expansion takes place.

4. A continuing low interest rate environment will enablecompanies to acquire the equipment they needand conserve cash. The prospect of continued low interestrates at least through 2014 will be an incentive forbusinesses to acquire equipment through financing andstill hold on to their cash for uncertainties. In addition tomaintaining cash flow, equipment financing will help businessespreserve capital and improve expense planning inchallenging economic conditions.

5. A majority of U.S. businesses will use some form of financingfor equipment acquisition. In 2013, $742 billion(55 percent) of the projected $1.3 trillion investment in plant,equipment and software investment in the United States willbe financed through loans, leases and lines of credit. Sevenout of 10 businesses will use at least one form of financing toacquire equipment.

6. Business size will impact equipment acquisition. Sizewill matter when acquiring equipment in 2013. Primarilylarger businesses anticipate increasing equipment spendingover the next 12 months. Small companies’ high degree ofconcern about general economic conditions and less access tocredit will temper their equipment acquisition plans.

7. The gaining prominence of cloud computing will transformthe way businesses pay for IT investments. Alongwith changes in how companies consume software andhardware, cloud computing will spawn new financing options.Companies will look to equipment financiers for variablepayment structures in the cloud.

8. Credit market conditions will remain favorable forlong-term equipment financing. Businesses will generallyfind an improving credit supply as they considerequipment acquisitions.

9. The one-year extension of bonus depreciation may provideincentives for businesses to acquire equipment. Thecontinuation of the depreciation bonus will allow businessesto deduct up to 50 percent of the cost of new equipment purchasesin 2013.

10. Although the value of lease financing will remain, businesseswill begin to adapt their equipment acquisitionstrategies to comply with long-awaited changes to leaseaccounting standards. A new draft of proposed changes tolease accounting standards by the Financial Accounting StandardsBoard and the International Accounting Standards Boardshould be announced this year, enabling businesses to begin toevaluate how their balance sheets, earnings and other financialswill be affected by equipment financing agreements.