Paving Equipment Trends
The Equipment Leasing and Finance Association (ELFA), Washington, D.C., released its Top 10 Equipment Acquisition Trends for 2021 Jan. 25, 2021. Given U.S. businesses, non-profits and government agencies are expected to spend more than $1.8 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.
ELFA President and CEO Ralph Petta said, “Not surprisingly, the effects of the COVID pandemic loom large in the list of trends this year. Despite upheaval throughout the economy, equipment acquisition continues to drive supply chains across all U.S. manufacturing and service sectors. Nearly eight in 10 of U.S. businesses use equipment leasing and financing to acquire the productive assets they need to operate and grow. We are pleased to again provide the Top 10 Equipment Acquisition Trends at a time when businesses need to understand the market environment more than ever to make their strategic equipment acquisition plans.”
ELFA distilled recent research data, including the Equipment Leasing & Finance Foundation’s 2021 Equipment Leasing & Finance U.S. Economic Outlook, industry participants’ expertise and member input from ELFA meetings, in compiling the trends.
- The U.S. economy will be a tale of two halves. The effects of the pandemic will continue with business restrictions and suppressed spending during the winter months. GDP growth will be weighted toward the second half of the year once vaccines are widely available, and the upside potential for economic growth later in the year is substantial with 4.7 percent GDP growth forecast for 2021.
- Capital spending will show positive growth. The way that millions of Americans live, work and socialize was impacted by the pandemic and required many businesses to reconfigure business operations. This is likely to continue in 2021, providing a sustained boost to equipment and software investment in the first half of the year, resulting in positive 7.8 percent growth for the year.
- A vast majority of U.S. businesses will acquire equipment through financing. The propensity to finance equipment is higher than it has been over the last two to three years as long-term interest rates have fallen sharply. The Fed is committed to keeping interest rates at or near zero for several years, which bodes well for businesses seeking financing. The Fed’s infusions of liquidity into the money supply also make cash more available.
- Customer demands and products will evolve beyond pandemic needs. Demand for equipment needed to connect employees working from home will change as organizations adopt hybrid workplace models and make other adjustments for conducting business. The growth of bundled, managed services agreements and efficient customer service solutions will continue as businesses seek greater support and flexibility in acquiring and managing equipment. Reduced travel, less need for commercial space and technology upgrades will be among wide-ranging impacts in the wake of the pandemic.
- Many key equipment types will show growth as a result of the pandemic. Broad-based investment growth is expected across a range of equipment types after plunging to historic lows in Q2 2020. Construction equipment investment should improve with increased demand for single-family homes, while trucks will get a boost from demand for over-the-road transportation as consumer spending strengthens throughout the year. Travel, airlines and hospitality will continue to be negatively impacted until full deployment of vaccines.
- Digitalization will be pervasive in the post-COVID equipment finance environment. Innovation from the digital adoption of modern smart technology and business models built around that technology will leap forward in equipment finance in 2021. E-signatures and e-leasing, deployed rapidly during the pandemic out of necessity for contactless transactions, will continue to be widely adopted. E-commerce solutions will continue to skyrocket to meet customer demands. Also expect equipment finance companies to continue to create remote and contactless back office operations, and speed of processes, with compliance a priority.
- Federal and state government action could have wide-ranging policy implications. The change in presidential administration along with Democratic control of both chambers of Congress could impact business investment decisions in a variety of ways. Washington policy makers could make significant changes in areas from taxation to infrastructure spending to climate policy and regulation. In addition, fiscal pressures and the blurring of consumer and commercial laws in some state legislatures may lead to policy proposals that restrict or otherwise make more difficult commercial financing transactions.
- Cybersecurity will take on renewed importance. The heightened use of digital and contactless methods for transactions, data and information exchange during the pandemic—with customers as well as between work-from-home employees—will bring renewed focus to the need for effective cybersecurity strategies. With the proliferation of bad actors and fraudulent transactions, businesses will increase proactive measures to protect their data.
- China will play an outsize role in determining market demand from key end-user markets. China is the world’s only major economy expected to have expanded in 2020.
- “Wild cards” could play a role in business investment decisions. There are other areas in addition to the trends above that businesses will keep an eye on that could impact their equipment acquisition strategies. The efficient rollout of COVID vaccines and their widespread acceptance will be critical to resuming a semblance of normalcy. Stock market volatility, small business recovery and a rise in inflation could all have potential financial impacts.
ELFA represents the nearly $1 trillion equipment finance sector. For more information, visit EquipmentFinanceAdvantage.org.