Equipment Finance Sector to Surpass $740B in 2013
The equipment finance market will exceed $740 billion in 2013, according to preliminary data released today (10/22/12) by the Equipment Leasing & Finance Foundation from the forthcoming U.S. Equipment Finance Market Study 2012-2013. The Foundation revealed the industry market size and other key highlights from the study at the Equipment Leasing and Finance Association’s 51st Annual Convention. The full study, which will provide an updated picture of the domestic equipment finance sector, will be released in November.
Highlights from the study, conducted by IHS Global Insight, include:
•Equipment finance volume has returned to pre-recession levels. The 2012 estimate for the equipment finance market is $725 billion. Current IHS forecasts suggest that the equipment finance market will continue to grow slowly over the next few years.
•The equipment finance sector is a significant contributor to capital formation in the U.S. economy. Of the projected $1.3 trillion invested in plant, equipment and software in 2013, 55%, or $742 billion, of that investment is expected to be financed through loans, leases and lines of credit. In 2014, the market size is projected to grow to $778 billion.
•Seventy-two percent of companies use some form of financing, including loans, leases and lines of credit. Thirty percent of companies anticipate increasing their equipment investment in the next 12 months, although smaller companies are more uncertain.
•Companies with sales between $25 million and $100 million doubled their share of leasing volume from 2007 to 2012. This may be in part a reflection on the difficulty in obtaining other forms of credit for this segment of the market.
•Cash as a method of purchasing declined for large companies from 2007 to 2012 as larger companies enjoy greater access to credit markets. In the current interest rate environment the penalty for holding cash is minimal. Companies may also be hanging on to cash in response to the high levels of economic, tax and regulatory uncertainty.