Equipment Leasing and Finance Association Announces Top 10 Equipment Acquisition Trends for 2018

January 23, 2018

Economic Upturn, Elevated Business Confidence and Tax Reform To
Support Strong Investment

WASHINGTON–(BUSINESS WIRE)–#capex–The Equipment
Leasing and Finance Association (ELFA) which represents the $1
trillion equipment finance sector, today revealed its Top
10 Equipment Acquisition Trends for 2018. Given U.S. businesses,
nonprofits and government agencies will spend over $1.6 trillion in
capital goods or fixed business investment (including software) this
year, financing a majority of those assets, these trends impact a
significant portion of the U.S. economy. In 2018, businesses are
expected to make their largest capital investments since 2012.

ELFA
President and CEO Ralph Petta said, “Equipment
acquisition is a key driver of supply chains across all U.S.
manufacturing and service sectors. Equipment leasing and financing
provide the source of funding for a majority of U.S. businesses—8 out of
10—to acquire the productive assets they need to operate and grow. We
are pleased to again provide the Top 10 Equipment Acquisition Trends in
order to assist businesses in understanding the market environment and
planning their acquisition strategies.”

ELFA distilled recent research data, including the Equipment Leasing &
Finance Foundation’s 2018 Equipment Leasing & Finance U.S. Economic
Outlook, industry participants’ expertise, and member input from
ELFA meetings and conferences in compiling the trends.

ELFA forecasts the following Top 10 Equipment Acquisition Trends for
2018:

Capital spending will have its strongest performance in six years. Following
a significant improvement in equipment and software investment in 2017
over 2016, investment will continue robust growth in 2018. Elevated
business confidence, fewer regulations and a broad-based cyclical
upturn in the U.S. economy, due in part to the strongest global
economy in over a decade, will contribute to a healthy business
investment trend before potentially waning toward year end.
Look for strengthening positive momentum in financed equipment
acquisitions. Although the growth of financed equipment
acquisitions last year did not exceed overall equipment and software
investment growth, equipment finance industry indicators point to
increased financing of equipment acquisitions in 2018. The few
persisting industry headwinds should be outweighed by a historically
high propensity to finance and a healthy equipment and software
investment forecast of 9.1 percent.
Tax reform will help unleash pent-up demand by businesses for new
equipment. Long awaited corporate tax cuts will have businesses
pulling the trigger on the equipment acquisitions they had been
putting off. Multiple measures of business confidence, including the
Monthly Confidence Index for the Equipment Finance Industry, back the
probability for increased equipment spending.
Higher interest rates will loom as the economy grows and tax reform
is enacted. A rising interest rate environment won’t deter
investment in most key equipment verticals, but businesses will keep
informed on Fed rate hikes. With the improving economy and its
accompanying rise in inflation along with a substantial increase in
the national debt owing to the new tax legislation, count on three and
possibly four rate increases in 2018.
Technological advances in equipment will attract businesses looking
to improve efficiencies. New technology will be even more
irresistible as businesses look for ways to increase efficiencies and
profitability as they take advantage of new market opportunities in
the growing economy. Attractive financing options will make the latest
equipment that may have been considered previously unaffordable even
more accessible.
Key equipment verticals will continue to rebound in 2018. With
economic growth drivers, including persistent business optimism,
stable credit conditions and healthy global demand, the solid
investment growth pattern from 2017 will continue for most equipment
verticals. Investment is expected to remain steady or strengthen in
equipment verticals, including agriculture, aircraft, construction,
industrial, trucks, computers and software.
Businesses will ramp up efforts to fulfill requirements of new
accounting rules for their leased equipment. With the new lease
accounting standard taking effect beginning in 2019, businesses with
leases on the books will be focusing on compliance in earnest this
year. In response, they will find that equipment finance providers are
developing strategies and products that are beneficial to lessees
under the new framework.
Financing options and services for equipment acquisitions will be
more innovative and customer driven. A changing business landscape
and disruptive technologies will drive equipment finance companies to
meet their customers’ unique demands. Expect more tailored financial
solutions to help companies innovate and solve business challenges,
such as metered usage that enables customers to pay only for what they
consume. Wider use of electronic documents and e-signatures for
greater convenience will become increasingly available.
Trade issues will pose headwinds affecting global demand for U.S.
business exports. Businesses seeking equipment to produce export
goods will be closely watching potential impacts on foreign trade. A
gradual strengthening in the dollar since 2017, if maintained, could
be a headwind to trade exports. Tensions could also escalate as U.S.
trade negotiations on NAFTA proceed and the Trump administration
continues to take a hardline stance on trade relations with China.
External “wild cards” will factor into equipment acquisition
decisions. Despite a more favorable environment for equipment
spending this year than in previous ones, businesses will have to
monitor ongoing issues throughout 2018. Tax reform aside, concern
about partisan politics in Washington may affect the confidence of the
business community over time. The residential housing market may not
get a hoped-for recovery in light of the Fed’s planned interest rate
increases and home prices rising faster than buyers’ incomes. Major
curbs on immigration could be a headwind to growth through labor and
skills shortages in several industries, including agriculture,
construction and hospitality. Finally, U.S. mid-term election results
in November could impact future federal legislation affecting
businesses.

For a video and an infographic highlighting the Top 10
Equipment Acquisition Trends for 2018, go to www.EquipmentFinanceAdvantage.org/rsrcs/articles/10trends.cfm.

More Information

ELFA has an informational website for businesses that want to learn more
about how they can incorporate equipment financing into their business
strategies. For resources about equipment financing, including a digital
toolkit, videos and infographics, go to www.EquipmentFinanceAdvantage.org.

For forecast data regarding equipment investment and capital spending in
the United States, see the Equipment Leasing & Finance Foundation’s 2018
Equipment Leasing & Finance U.S. Economic Outlook at https://www.leasefoundation.org/industry-resources/u-s-economic-outlook/.

About ELFA

The Equipment Leasing and Finance Association (ELFA) is the trade
association that represents companies in the $1 trillion equipment
finance sector, which includes financial services companies and
manufacturers engaged in financing capital goods. ELFA members are the
driving force behind the growth in the commercial equipment finance
market and contribute to capital formation in the U.S. and abroad. Its
575 members include independent and captive leasing and finance
companies, banks, financial services corporations, broker/packagers and
investment banks, as well as manufacturers and service providers. For
more information, please visit www.elfaonline.org.

Follow ELFA:
Twitter: @ELFAonline
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ELFA is the premier source for statistics and analyses concerning the
equipment finance sector. Please visit www.elfaonline.org/Data/
for additional information.

Contacts

ELFA
Amy Vogt, Vice President, Communications and Marketing
202-238-3438
avogt@elfaonline.org