The Equipment Leasing and Finance Association, Washington, D.C., has released its Top 10 Equipment Acquisition Trends for 2013. Every year, U.S. businesses, nonprofits and government agencies make over $1.2 trillion in capital goods, software and other fixed business investments, having a significant impact on the U.S. economy.
“Equipment acquisition plays a critical role in driving the supply chains across all U.S. manufacturing and service sectors,” says ELFA President and CEO William G. Sutton. “We have distilled recent research data, industry participants’ expertise and member input from ELFA meetings and conferences to provide our best insight for the top equipment acquisition trends for the coming year.”
The following is designed to help businesses with their strategic equipment acquisition plans:
1. Corporate perceptions of the economic outlook will be a primary driver of business investment decisions. Despite pressing considerations such as technological innovations and aging equipment, the economy will be the true barometer for whether or not businesses acquire new equipment in 2013.
2. Equipment investment will pick up in the second half of 2013 as the nation’s fiscal uncertainty eases. An improving housing sector will provide an added boost.
3. Pent-up demand will spur investment across varied equipment types. Demand for replacement equipment will drive investment in the construction, agriculture and transportation categories in particular. However, greater economic improvements will be needed before significant investment expansion takes place.
4. The prospect of continued low interest rates at least through 2014 will be an incentive for businesses to acquire equipment through financing, while holding on to their cash for uncertainties.
5. A majority of U.S. businesses will use some form of financing for equipment acquisition. In 2013, $742 billion or 55 percent of the projected $1.3 trillion investment in plant, equipment and software will be financed through loans, leases and lines of credit. Seven out of 10 businesses will use at least one form of financing to acquire equipment.
6. Larger businesses will be the primary acquirers of new equipment in the next 12 months. Small companies’ high degree of concern about general economic conditions and less access to credit will temper their equipment acquisition plans.
7. The gaining prominence of cloud computing will transform the way businesses pay for IT investments. Along with changes in how companies consume software and hardware, cloud computing will spawn new financing options. Companies will look to equipment financiers for variable payment structures in the cloud.
8. Credit market conditions will remain favorable for long-term equipment financing. Businesses will generally find an improving credit supply as they consider equipment acquisitions.
9. The one-year extension of bonus depreciation may provide incentives for businesses to acquire equipment. The continuation of the depreciation bonus will allow businesses to deduct up to 50 percent of the cost of new equipment purchases in 2013.
10. Although the value of lease financing will remain, businesses will begin to adapt their equipment acquisition strategies to comply with long-awaited changes to lease accounting standards due later this year. At that point, businesses will begin to evaluate how their balance sheets, earnings and other financials will be affected by equipment financing agreements.
"Equipment acquisition plays a critical role in driving the supply chains across all U.S. manufacturing and service sectors” William G. Sutton, ELFA President and CEO