The survey, which reveals industry perceptions of 15 equipment markets based on a survey of ELFA members, indicates that equipment managers and leasing companies remain optimistic with some of their equipment outlooks, yet decidedly pessimistic in others.
The study’s author, Carl Chrappa of The Alta Group, noted that this year marks the seventh year in a row of positive survey results. However, he reports that survey respondents identified a number of potential threats to the secondary market this year, including a slowing economy, oversupply, over-regulation, used equipment surplus, protectionism, rising interest rates and economic instability. Overall, according to the comments received, the biggest threats to the secondary market are bloated equipment inventories and the health of domestic and global economies.
Construction equipment was the big winner for the fourth year in a row. The outlook for construction remains good, pinned to the improving health of the economy and low interest rates. Sales of used equipment have been declining a bit due to sales in the primary market, weak global trade and the strong dollar discouraging exports. Proposed national infrastructure projects could be a plus.
Medical equipment finished in second place. This high standing in rank is believed to be linked to a better understanding of the impact of the Affordable Care Act on hospitals and clinics and talk of an ACA overhaul. This industry has a preference for leased equipment, which continues unabated, driven by demographics linked to the increasing health care needs of the “baby boom” generation. However, potential Deductible Reimbursement Account (DRA) reimbursement cuts and rules aimed at the industry could weaken the new equipment market while potentially making some used equipment more desirable. The medical equipment secondary market is robust, and the refurbished equipment market is forecast to grow sharply.
Machine tools finished in third place, due to the strong domestic automotive and allied industries, along with the now-improving oil exploration sector. This ranking is also believed to be linked to financing choices relative to smaller ticket size opportunities and to one-off deals, large vendor product line financings and entire manufacturing plant fundings. In addition, low interest rates and accelerated depreciation have aided this segment. In the primary market, sales for metal cutting equipment fell 4.3% in 2016, though total consumption remains high. Sales for this sector are forecast to remain high in 2017. However, the secondary market for machine tools has weakened a bit, and prices are now being discounted in both the primary and secondary markets.
Hi-tech/computers finished in fourth place. This industry continues to operate on very low margins but has a very large secondary market. Global computer sales continued to drop in 2016. Declining primary market PC sales reflect a growing preference for phablets and wearables, but could have positive implications for the secondary market.
Plastics equipment tied for fifth place, up from eighth place last year. Currently, this market segment continues to experience a solid turnaround in almost all categories. Sales of new injection molding machines increased again for the seventh year in a row. Used prices for plastic injection molding machines have increased by 20% to 50+% over the past five years. Much of this is thanks to the automotive industry, which requires high-capacity IMMs for its products, and auto parts suppliers, which utilize smaller capacity plastic equipment. However, used blow molding equipment prices related to PET bottling have declined due to advances in technology and industry consolidation.
Trucks/trailers tie for fifth place. New truck sales dropped more than 22% last year and are expected to fall again this year. Competition from rail bears some of the blame. New trailer shipments were brisk, breaking the 2006 record. Sales of used trucks and trailers are good, although resale values have been declining. This sector has greatly benefited from low fuel prices and interest rates. There is continued optimism for this equipment type.
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