ELFA IDs 10 Equipment Acquisition Trends for 2022
January 14, 2022
The Equipment Leasing and Finance Association (ELFA) which represents
the nearly $1 trillion equipment finance sector, today revealed its Top
10 Equipment Acquisition Trends for 2022. Real private investment by
U.S. businesses in equipment and software is forecast to be almost $2
trillion in 2022, with a substantial amount of that investment activity
financed, so these trends impact a significant portion of the U.S.
ELFA President and CEO Ralph Petta said, “The pandemic is the underlying
theme throughout the trends this year as 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 provide the Top 10 Equipment Acquisition Trends
to help businesses make their strategic equipment acquisition plans,
especially since there are significant opportunities for businesses to
benefit from expected economic growth this year.”
ELFA distilled recent research and data, including the Equipment Leasing
& Finance Foundation’s 2022 Equipment Leasing & Finance U.S. Economic
Outlook, industry participants’ expertise and member input from ELFA
meetings in compiling the trends.
ELFA forecasts the following Top
10 Equipment Acquisition Trends for 2022:
- The U.S. economy
will have solid growth in 2022. After a highly
volatile 2021, the economy is on more even footing this
year, with the widespread availability and effectiveness of
vaccines reducing the risks from the pandemic. Potential for
economic growth later in the year is substantial with 3.5%
GDP growth forecast for 2022.
shortages will continue due to supply chain
disruptions. Delivery bottlenecks will likely
persist, especially if U.S. trading partners shut their
borders in response to new virus strains. Businesses will be
likely to invest more capital in maintaining inventories of
crucial components and develop relationships with new
suppliers to reduce the impact of future disruptions.
- High inflation
will be a major headwind for Main Street and the overall
economy. In fall 2021, supply chain snags added to
inflationary pressures, which will be prolonged this year.
The Federal Reserve has announced several planned interest
rate hikes in 2022. It remains to be seen what impact, if
any, interest rate increases will have on supply or demand.
- Positive growth
in capital spending will continue. Equipment and
software investment expanded by more than 15% annualized
from January to June 2021, which was comparable to the rapid
growth of the post-2008-09 recession. With continued, though
not as strong demand, equipment and software investment
growth of 4.6% is expected.
- Equipment finance
will play a significant role in economic growth.
Based on historical precedent, more than half of equipment
and software investment this year will be financed. In
addition, inflationary pressures that drive equipment prices
higher will make financing more desirable with payments
spread out over time.
- Government fiscal
and regulatory policies will pose opportunities and
challenges to capital spending. Businesses will
need to stay informed on a range of federal and state policy
changes that will impact their operations. They include the
long-awaited infrastructure spending law enacted by Congress
that will have businesses investing in related equipment
verticals, and federal and state initiatives that will
create more red tape for lenders along with associated costs
changes in the workplace will continue to impact equipment
demand. Ongoing remote/hybrid work arrangements
will drive demand for new types of equipment and software as
businesses continue to adapt to the “new normal.” Automation
and AI technologies such as robotics, machine learning and
natural language processing will boost the productivity of
employees working remotely and fill the void of unavailable
key equipment types will show growth. While
equipment and software investment should expand at a healthy
rate, growth is likely to be uneven across equipment
verticals. Trucks, oil & gas equipment, and materials
handling equipment should benefit from sustained demand.
Verticals such as automobiles, construction machinery and
agricultural equipment may continue to face pandemic-related
headwinds such as input shortages, high energy prices and
volatile demand conditions.
- Businesses will
increase their focus on digitization and data. As
investment in digitization accelerates across most
industries, businesses will need to leverage both customer
and external data for competitive advantages in areas such
as customer behavior and market dynamics. Cybersecurity
risks will require increasingly robust cyber- and
data-security protocols to be implemented.
- “Wild cards” will
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. Continued fallout from the
pandemic and future variants, ongoing labor shortages,
passage of the “Build Back Better” spending package in
Washington, and mid-term elections could all have potential